welcome to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin and steve liesman. joe is on vacation this week. our top story is the jobs report. the consensus right now is calling for 230,000 positions added. that would be down from a gain of 288,000 that we saw in june. this will be the sixth straid straight month, though, that employment is growing by 200,000. we haven't seen a stretch this long since 19897. the unemployment rate is seen holding steady at a six-year low of 6.11%. the jobs report isn't the only economic issue today. consumer sentiment, personal income and spending, ism manufacturing and construction spending and auto sales, that's a mouthful. our newsmaker of the morning, dallas fed president richard fisher, he will be joining us exclusively for an hour starting at 7:00 a.m. eastern tim. this is all coming for the back drop of today's markets.

the dow is now negative for the year. it's accelerated throughout the day and the major averages closed at the lows of the session. all 40 dow stocks finished in the red yesterday. 97% of the s&p 500 and 96% of the nasdaq closed lower. all ten of the sectors were down at least 6%. heavy volume throughout this. we saw 4.3 billion sharls that were traded on the nyse. more than a billion more than the average. and as for volatility, take a look at the vision. you're going to see right now that the vision is up about 27%. 16, almost to 17 at this point after these incredibly low volatility rates. we knew that when things changed, they would change in a hurry. yesterday's sell-off means that the dow and the s&p had their first monthly decline since january. the dow and the s&p dropped nearly 2% in month of july and it doesn't end there, folks. if you take a look at the futures this morning, you'll see

there are more red arrows. the dow is now indicated to open down by triple digits. a decline of 113 points below fair value. s&p futures off by about 14 points. and take a look at the ten-year. this is what we've been watching so closely. at this point, the ten-year is yielding 2.752%. picked up steadily. we have a lot of people we're going to be talking to today, including mark grant, who is betting for a yield of 2% or lower for the end of the year. steve, over to you. >> overseas, stocks in europe are in the red in early trading. do we have a -- boy, yes, we do. down 1.4%. traders are taking cues from yesterday's sell-off on wall street. the eurozone factory growth down to accelerate as expected. growing tensions in ukraine on sentiment. in asia, stocks are mostly lower. the nikkei down 0.6 %. the hang seng down about a

percentage point. shanghai down 0.75%. but there was some bullish economic news out of china. pmi there showing manufacturing rose to the highest level in more than two years. let's check on the broader market this morning. the dollar, up against the pound, down against the euro. but it's been stronger against the euro the last several weeks. and the yen, it's up against the yen, 102.93. looking at oil, the sell-off continuing there. wti crude down about a puck, $97. and brent down 40 cents, $105. natural gas down across the energy spectrum. gold, up $2.50 after a sell-off to 1,285.40. >> let's talk about an explanation for the market in just a moment. corporate news first, i don't think there is an explanation for this, but that's a different story. a number of stock toes watch this morning, earnings reports that came in last night, let's run through a couple of the big

movers. tesla's earnings beat the street. revenue nearly doubles. shares rose on the news before falling. we're going to talk more about the veteran auto industry watcher named paul engracias. 6:50 a.m. eastern time. you don't want to miss that. the nation's automakers will be reporting monthly sales today. sales hit an eight-year high in june, rather, and analysts are looking for another positive set of reports. chrysler out with its numbers. its sales were up 19.7% in july. that's its best july numbers in nine years. however, that was slightly below forecasts. shares of gopro, we talked about this right at the top, punished big time after the company reported quarterly results for the first time as a public company. the action cameramaker beating the street, but that was not enough to appease investors. we're going to talk to an analyst about in about 20 minutes. you'll see that stock off about 12% now. and then one more stock to watch, expedia, better than expected quarterly results.

among the reasons, higher hotel and flight bookings and i think i might have helped contribute to that a little bit. >> are you expedia? >> occasionally expedia, occasionally -- >> i used to use it. no more. >> no more? >> when you have problems, the airlines won't help you at all. because they say you didn't buy through -- >> you're a third party and you're on your own. >> you're a third party and you don't matter if you have anything that goes wrong along the way. >> there you have it. the countdown is on to the july unemployment report. the markets expect another big jump in job creation. joining us now, michelle gerard and managing director and jim o'sullivan, high frequency economics chief economist. we're looking for 230, michelle? >> yeah. we're very close. >> yeah? >> yeah. we have a stronger number. i'm at 235 and -- >> 225, pretty much the same thing. >> we're close to the trend. we're hovering around the year-to-date trend. >> a little a little on the

higher side. but my model is not complete. where are you? >> 270. >> 270? >> yeah. i got a crazy idea that there may be an increase in government by the private sector, 264. >> one of the reasons i'm softer is this idea that perhaps some of that june strength came from the influx of workers, you know, a lot of kids finished with school. the ability for firms to actually find some people to hire. because what we keep hearing from companies anecdotally is that it isn't easy to find workers and that may explain why we had an outside gain in june. but a lot of that supply was taken up and in july they were kind of back in that same spot where it was hard to fill some of those positions when they settled that trend. >> jim, what's the risk here? i mean, if we get our -- are you concerned that your -- if your number is wrong, it's too low? >> no. i could go either way, frankly. i think either way, whether it's above 225 or a little below,

anything up in that territory is more than enough to keep the unemployment rate coming down. so i think for the markets perspective, the focus has to be more and more on the slack and labor cost parts, you know, the payrolls are up 200,000, 250,000, even 150,000, it's more than enough to bring demographics down. unemployment rate is down more in the last 12 months than anytime in the last 30 years. i think the question now becomes do we start to see pressure in the wage numbers? can i ask a totally different question. if we get a great jobs number today, does the market rally on that somebody? >> can i ask why you guys think the market is down? we're looking at markets down triple digits. >> i have to say, i mean, yesterday even i wondered to the extent that that eci number, there's a lot of things going on, obviously, geopolitical and things along those lines. but i also think the market is to some extent becoming unnerved about the potential if, you know, we had better gdp numbers than expect.

we had a higher eci number. the employment context. i think there's some thought that maybe the fed isn't going to be able to stick with this guidance of lower for longer. >> that's key. and if we see a good jobs number does that in turn -- >> is it -- >> it feels like given yesterday's route, which to me made no sense, but i don't want to cast aspersions. it just seems to me that you could get a great number. and then if you get a bad number, does that number go up? >> clearly, the fed has been willing to take 200,000 plus a month in payroll, unemployment keeps falling. at what point does that push the fed to move quicker? and the key has to be the wage numbers. if you got a 250 on payrolls, a zero on average hourly earnings, it would probably be a good -- >> tafrg hourly earnings is going to be the key. that is what the fed is watching the closest. >> it's also month to month yesterday, the more reliability quarterly indicator.

but nonetheless, it's the best we have on a monthly basis and over time we get that. the unemployment rate, as well. it's already at 6.1. >> but let's talk about if the market is wrong on the fed, how long could it be? the average expected fed funds rate at the end of 2015 is 1%. if we get stronger growth right now, what could be the upper limit of where you'll be on the funds rate end of 2015. >> well, you could easily get 1.5% for sure. but i would go beyond that. look at 2016, look at 2017. you're talking about a ten-year treasury yield, expect the funds rate over the next ten plus years. the end of 2016 when the markets have basically got a 180 price stand, fed officials themselves in their projections at 250, that's a pretty big difference. i would argue that 250 is too low. >> i would say the same thing. the fed has a neutral rate up

around 3.75%. but, you know, the other thing that we keep bringing forward actually is that even the level that the fed will ultimately be able to stop at, i mean, people interchange the long run, that's going to be the highest that we'll get this cycle. but we sat at zero for an awful long time. and the idea that inflation, for example, that may not even be able to stop at that level. none of this is in the market but that's why -- >> so this is not just a reset of next year, it's the whole trajectory. so this month -- and i think increasingly over the next several months, the focus is not going to be on how much water we're taking out of the bucket, but in how much water is left in the bucket. and by that i mean the amount of slack in the economy. >> we were talking about slack -- >> for the economy. >> glad you confirmed that and it's going to look at things like people working part-time for economic reasons, the unemployment. the last number i calculated

yesterday was nearly 20 million americans. maybe 3 percentage points extra in terms of the labor force of slack out there. which means that if the fed is too low, it doesn't have to move very quickly, does it? >> well, first of all, i actually think there's probably less slack than the fed or -- but i think getting back to what jim said, ultimately, we'll know when there's slack or not or how much slack when we see wage pressures. and i think this is what even the fed has acknowledged. i can say all i want i don't think this is much slack. but unless wages start to pick up, it's hard to make that -- >> let me try and make this come back. >> are you -- >> no, i want to get back to the urgency of the markets. we are talking about a major market sell-off here. and i want to figure out what you guys think is really happening, what the market wants to hear, how big of a down turn this is, if you think this is the beginning of a pul big pullback that everybody has been looking for. we've been waiting forever for a 10% market pullback. is this the beginning of something big or do you think this is a one off, michelle?

>> the one thing i'll say, even -- i don't think the fed is going to slip as quickly as perhaps the markets are worried about. i think this fed is going to continue with their message, even if things look better, we're going to move slowly. there's no urgency. i think we will continue to hear reassuring messages from the fed. and i don't actually think the data are going to be as challenging -- they're not going to be so strong that they are going to force the fed -- >> and i know you're all economists, but when you look at what happened yesterday, do you have a lima reason for yesterday? do you have a line of reason for this morning? >> part of the reason is is the fed outlook changing? and the other way, the fact that the bond market didn't rally, i think it tells you something about the rethinking of the fed outlook. >> what does that mean? >> well, no, i mean, the markets are starting to think more about the possibility that the fed will be tightening a bit sooner

and a bit faster than has been expected. clearly, there are some geopolitical issues and markets are volatility areas. >> steve, you pointed this out this weeks talking about the fed futures jumping up. there was a big jump in gdp moving things forward, just expect -- >> but i don't get what jim is saying because in that world that you described, yields should be rising. >> and then the stock market pulling off pulls them back again. they were up yesterday in the first couple of hours after claims in ecb reported and as the equity market -- that puts you back to flat. but you're still up 10 basis points or whatever in the last couple of days, despite the equity markets being down. so i think once the equity market stabilizes, then there's room for the bond yields. >> we saw 2.6% at one point during the trading day. so you would expect to see bonds pushing higher? >> i would think ultimately -- if the economy keeps improving and we start to get some wage pressure, then yes. >> that drives me nuts because

the metaphor here is you get out of the way of the oncoming truck into the way of an oncoming train, right? that's essentially -- if you sell stocks because you're afraid of the fed and you go into bonds, then you get right in the way of the oncoming -- is that not a -- >> the equity markets shouldn't be tumbling. if the economy is growing, the fed is in no rush to tighten, when they do tighten, the policy is going to be easy for several years. earnings region price earnings ratios are extreme. there's not an equity market for the standpoint to tumble. should it flatten out relative to what we've been seeing? sure, in a world where bond yields are rising. but the back drop is not for the equity market right now. >> i do to some extent blame the fed a little bit for this nervousness. one of the things that they've done is in trying to justify their reason for saying so easy is to suggest that we have to be, we have to be this easy because the economy needs this kind of support. and they've kind of sent this message over and over to the

markets that we need to be there, we need to be there. so there's nervousness about what happens when they're not there. and i think there's going to be -- i think to get past this first tightening, actually, it's to show that we can -- you know, we can handle these moves, we can get off zero and the economy can still keep growing. and i think we'll ultimately be very positive for the economy. but it's going to be a very nerve-racking time here as we make this transition. >> if joe were here, i want to guarantee he would be talking about this concept of weak hands and strong hands and i think he will be talking about this idea that stocks would pass from the weak hands that don't want to hold stocks in an environment of rates to other hands that may want to hold the environment of a better economy and the holders may be different rye now, people who are going to make an idea to buy stocks for one reason and -- >> and the question becomes to what alternative and that's where your metaphor comes in very well. what alternative do you have to equities? >> right.

and i have a different question, which is how much does the trading yesterday is generated by human beings, make good stigzs and how much were made by model? >> that's why i would expect to see a bounceback on a morning like today. when you see triple digits down again, that makes you stop and pause. usually the humans would be stepping in in the meantime. >> well win do think if we get numbers like jim and i are looking for, i think that that will be somewhat common. because i think that does not suggest that this urgency for the fed to have to move a lot quicker and sooner, i think if you get a number up close to 300 again or even in the high 2s that will feel -- or high earnings, hourly earnings number, that would weigh on the markets. but i think the kind of numbers that we're looking at might be somewhat calming that suggest the fed can stay the course a little bit longer. and not necessarily that they have to keep rates at zero forever, but that they don't have to move away from this gradual normalization of policy. >> thank you. >> thank you.

>> thank you. when we come back, more on the markets and the economy is front and center all morning ahead of that jobs report that's coming up later this morning. and the futures right now are still looking like they have some heavy losses. dow futures down by about 98 points below fair value. s&p 500 futures down by 12 and the nasdaq off by 27. when we come back the honeymoon is over for a hot ipo. gopro shares, is now the time for investors to jump on the stock? "squawk box" will be right back.

gopro earning 18 cents for the quarter, two cents higher than expected. the stock plummeted in extended hours trading. it was down by about 10%. you can see right now, $43 a share is the last trade, that's a decline of almost $5. joining us right now to break things down is charlie anderson, senior research analyst at dourdty and company. thanks for joining us. >> thanks for having me. were you caught by surprise, as well? >> yeah. you mentioned expenses. that wasn't the surprise to me. it's their debut quarter, it's a hot product. i'm surprised frankly they

didn't beat by more on the sales. i think as we looked through it the culprit was europe. america was up 50%. europe was up only 7%. that was surprising. so it looked to us like there was too much inventory in the channel in europe and that was the result of not a larger beat. >> do we think that's a problem with the company in terms of getting the same excitement in europe? do you think that's a fixable problem? >> i think it is. i think these are mostly self-inflicted wounds. we have to remember this company started getting large three years ago. they've been staging their distribution. they sell mostly through distributors in europe, versus direct in the u.s., so you don't see these large best buy implementations in europe. so i think that's something that will bloom over time. it's just early in the maturation cycle. >> what did you think of this company and this stock before the earnings yesterday? what do you think now? >> still, we're downgrade to go neutral today for valuations

reasons. we had a buy going in. we thought there was a potential for a great upside in the quart he. it was good, but not good enough to make us need to take our estimates up significantly higher. at that point, the valuations didn't make that -- so we're going to neutral now. >> this stock ran up very quickly since its ipo earlier this year. was that surprising to you? >> yeah. i mean, looking from the ipo price, we thought -- in some ways, it was justified by the fact that this thing was doing really well going into the quarter. but at the same time, you've got to step back and look at, you know, just historically, it's trading at much higher multiples than apple ever has, than garmin has. it was a small float, right? so some of it was supply and demand. >> okay. charlie, i want to thank you for joining us today. >> thank you. why don't we take another look at what's been happening

with the futures this morning. if you are just waking up, you saw yesterday the dow was down by 317 points. you may have thought you would see a rebound this morning. that is not the case. if you take a look, there are more red arrows and some significant declines in the futures. dow futures down by about 114 points below fair value. s&p futures are off by 14. nasdaq at this point is looking like it's down by 31 points. we have a big jobs report coming up this morning and that is going to be a key focus. we've been talking this morning, trying to figure out what exactly the market wants to see. a good number or a bad number? because the concern from a lot of people are saying that, look, the reason you're seeing the market at this point is because there is an expectation that the fed will be forced to move earlier than what the market was expecting. >> what happens if i tell you that good or bad is still bad? >> that's an interesting theory. >> if it's bad, the market is not going to go up. you never get excited about a bad number. and if it's good pb maybe you still have your bad problems. >> and i guess you can look into the real details within as we

were just talking about the last time about actual wage, average hourly wage which is going up, too, and what that signals. >> if it's good, it's just good. more people working is good. higher wages are good. and if you keep your keep your focus, you don't really get -- i would tell you that -- >> one of the problems we're going to fix here, there's a bit of a fed vacuum, right? we know how the fed felt back before 4% gdp. but we don't know how they're going to go if -- but we have richard fisher coming up and we can ask him that. but we don't hear from the fed leader until the he of the month when we get to jackson hole. my opinion is janet has to talk to stan. >> stan? >> janet has to talk to stan publicly. because stan has this idea that

how can you possibly be so below normal with the economy so much closer than normal? >> i will tell you, we have mark grant coming up in just a few minutes and he has some interesting thoughts on this because his point has been that people have been far too focused on the fed and not focused enough on what's been happening in other countries. if you look at the italian tenure, if you look at the spanish ten-year, that's where you get some -- >> the low bubble since the 1400s and we didn't even know that they -- >> yeah, sure. >> what agency was doing that? >> there are actually records of that. there were records of loans that were given to -- yes. >> coming up, we're going to talk -- >> wait. >> okay. coming up, the eurozone in the danger zone. the major european averages plotting again this morning. how deflationary worries across the pond could sell big trouble for the markets. plus, tesla putting the pedal to the metal for 2014 production.

is this stock darling going to see more acceleration or not? more squawk coming up. or if power could go anywhere? or if light could seek out the dark? what would happen if that happens? anything.

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good morning and welcome back to "squawk box" here on cnbc. i'm andrew ross sorkin along with becky quick. steve liesman is here. joe on vacation. he missed a big day yesterday. investors are waking up to another morning of red arrows. let's tell you what's happening. dow off about 107 points. s&p 500 opened off about 13 points. nasdaq looked like it would open off about 29 points. that comes, of course, after

what has to be described as a route yesterday, erasing the gains for the entire year. by the way, my favorite sentence, we've been trying to make sense of this, ben white's favorite sentence, too, in the times, the reasons for the losses on thursday are not entirely clear. that's about the most honest thing you could say. >> we will have people on today who will do just that. >> and they're going to try to hopefully help us figure out what to do about all this, as well. these futures could turn around. depending what happens at 8:30, polled forecasters say the economy likely added 230,000 jobs last month, down from a gain of 288,000 in june. it will be the sixth straight month unemployment has grown. we haven't seen a stretch this long since 1997. unemployment holding steady at

6.1%. dallas fed president richard fisher, he's going to join us sclus ofly for an hour starting at 7:00 eastern. as steve said, this will be one of the first opportunities for us here, a little bit of the inside the room. what people have said or are thinking about all this in a post 4% -- >> actually, since the meeting. >> since the meeting. >> and we heard about 4%. >> and how the fed will process stronger growth. and i think we know what richard fisher thinks. i think he thinks that the fed ought to move even faster. >> certainly an inflexion point. we also have a lot of red when it comes the europe and asia. those markets reacting in kind. you can see that the ftse is down by 1.4% this morning. the biggest decliner, it's the dax in germany, off by 2%. but 1% to 1.5% declines for many of the major markets. overnight in asia, the declines are more muted. the hang seng was off by 0.9%. you saw lows for the nikkei and

the shanghai. if you're looking at oil prices, crude oil dropped nearly 7% for the month of july. that was its worst month since may 2012. now you can take a -- yeah, for anybody driving and filling your car up. take a look right now, it's down another 87 cents for wti, 97.30. look at the ten-year, yielding 2.578%. it's been stuck in a range, as rick santelli was telling us yesterday, between 2.4% and 2.64% i think was the range that we've been sitting and looking at for a long time. a lot of players trying to figure out if it's going to go up or down from here. we're going to talk to mark grant in just a moment. but quickly, the dollar at this point, the euro saw its biggest monthly drop versus the dollar since february. july, down by 2.2%. dollar down this morning, euro is trading at 1.3398. dollar/yen at 102.93. gold prices are up slightly,

$1,285.70 an ounce. is the eurozone falling deeper into deflationary traps? let's talk about the possible implications with mark grant, managing director at southwest securities. mark, before we get to any of that, what do you think is happening with this market sell-off? >> i think it's really just a correction having to do with how much the market moves. there's a tremendous a lot of leverage in the market. i think people began to get nervous and a lot of private equity firms recently have cut down on their positions and i think that's because of it. >> you mean there are certain players looking for any reason to get out? >> certainly players that have gotten i think very nervous. as you know, i deal with a lot of very large institutions all over the world. and there are a lot of guys that are nervous about equities at these levels. >> and what makes them nervous? is it watching geopolitical events? is it watching how far we've run?

>> i think it's the combination of the valuations and a lot of specific stocks. i think that they've gotten all they're going to get out of them. also, i think the geopolitical events are making people nervous, especially in the mid east, the ukraine. >> mark, why did it take until thursday, if that's the case? you've had the geopolitical mess around for the past two or three weeks. what was it about the past 24 hours? >> i honestly think there is no particular, to use becky's word, inflexion point. what i think it was is people began to get out and this -- i've seen over all my decades on wall street, the herd starts moving, people get nervous and follow the herd. >> are you nervous? >> no, i'm not nervous. i think that the interest rates, as you know, are going to continue to decline. and i think that's going to put a -- a barrier, if you will,

underneath the markets to present any kind of serious correction in equities. >> so you think equities in particular are still going to be the place to go, that there aren't going to be decent alternatives in other places? >> well, i think the long end of the bond market, if i'm right and we have 2% yield on the ten-year is going to be a very good play. to date, the treasury market has outperformed the equity market in terms of appreciation since the beginning of the year. so i continue to think the bond market, especially on the long end, is a good place to be. >> mark, what you're saying is very counter intuitive, but i've known you long enough to know that i ought to understand what you're thinking. tell me, in an environment of an improving economy, which is aus tentbly where we're going here, how do we get and why do we get from 2.6% down to 2% on the ten-year? >> okay. i'll tell you. so the first is the -- what the fed is doing, in my opinion, and

not really opinion, they have an arsenal of 4.75 trillion bullets. so they can push the bond market down and that equate toes about 39% of the treasury market. too, you have relative value in play the same -- let's say you look at the five-year. so we have the spanish five-year that about 34% less than the american side. the italian side is 29% less yields than the american five-year. so there's a lot of relative value. come in tomorrow over the american markets. the final point i would make is that the gdp number is driven and one is driven to a great extent by lower interest rates. we have better values in real

estate, much lower mortgage rates, and the gdp number. >> what happens to the stock market at this time when the ten-year moves from 260 down to 2? >> the stock market is -- avoid, as interest rates begin to go down lower, many will come back out of the bond markets and go back into the equity markets. i think it's going to help the equity markets as we go lower in the yield. >> and then fill in the final piece of the puzzle here, mark. what should the if he fed do during this time period? ostensibly, qe rolls off. what happens to the fed funds rate during this scenario you're laying out? >> i think the fed funds rate might come up a little, depending on people's perception of the markets. however, i will also say that as yields go down, it's better for the american economy, obviously, no matter how you look at it and it helps equities.

and i do not think the fed is going to let loose of its 4.75 trillion. they can stop and the taper can end. but they still have a tremendous amount of buying power and i don't think they're going to get rid of it. >> hey, mark, i understand where you think interest rates are going to go. but do you buy into the argument in terms of what happened yesterday and the way people think about the stock market today and perhaps even the way they may think about the jobs report today that if we get a hot number, a good number, that that actually could be bad news for the market in part because the fed pulls forward? even though i know you don't think they will, but that is going to be the perception because we're playing one massive gain that's psychological exercise at this point? >> i think they think the bond market slightly, and if it moves slightly, because of the economic numbers and that may be true on a very short-term basis with the jobs numbers. and i think unless you're, you know, trying to play fast money,

an investment for the longer term that it's going to work would out well regardless. >> what happens in europe with inflation, mark, and how important is that to the united states? we know that the numbers came in lower than expected. it seems like they built a deflationary story here. and if you don't mind, the euro has defied expectations. it's been sort of defying newton when it comes to gravity. it's down a bit, 1.33 and change but somebody will figure out a way more towards 1.20. >> the reason there is a simple one that most people have talked about. oil and energy is sold in dollars. the contracts, major purchases, to europe because of the rate against the dollar. gets the discount of about 35%. so it's been good for europe up until recently. now with their deflation rate,

it also with their slowdown in exports, they've decided they like to try and lower the euro. and i think mr. draghi and company are playing with that notion now. >> all right, mark, it is great talking to you. thank you so much for joining us this morning. and keep us up to date as you see things coming in, okay? >> thank you, becky. my pleasure. >> guys, we are less than two hours away from the main event of the morning. the july jobs report will arrive like clockwork at 8:30000 a.m. eastern time. right now, the futures remain under pressure following through on the sell-off from yesterday and the squawk newsmaker of the morning an exclusive one-hour with dallas fed president richard fisher. the fed meeting just days ago, we take on the fed actions and markets and health of the economy. the first word since the meeting only on "squawk box" when we come back in just a moment.

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welcome back. everybody. yesterday the dow was down 117 points. take a look. you'll see the futures are indicated lower once again. in fact, the dow futures are down almost by triple digits. they have been down triple digits at points through the morning, but right now, dow futures look like they are down by 97 points below fair value, s&p futures off by 111.5 points and the nasdaq is down at this point about 25 points. the losses we saw yesterday in the markets were significant. you're talking about wiping out the gains that we've seen to this point for the dow. you're talking about the first negative month for the dow and the s&p 500 since january.

so some significant declines yesterday and it added up to some weakness for the year and the month. if you're taking a look at what's been happening in europe, red arrows there, as well. in fact, the dax is down by almost 2% at this point. decline of 183 points. the ftse is off by 1.3% as is the cac in france. italy, the ftse down by just over 1%. >> okay. coming up, riding with you on tesla, rolling out results after the bell. the company breaking ground on new battery factories. is it wise to bet against the man, elon musk right now? that is next. and then at the top of the hour, getting inside the center bank. dallas fed president richard fisher will join us for a squawk exclusive starting at the top of the hour. a perfect guest with everything going on in the market. squawk returns in just a moment.

welcome back. we've been talking about the sell-off in stocks with a junk bond market telling the story. prices dropping sharply after today's investors ran the risky corporate debt. reporting a third consecutive weekly decline in junk bonds. check out this high yelled bond spider etf, down more than 3%. >> 30%. >> is it 30%? >> down more than 30%. >> i'm sorry. >> down 33% right now, a drop of

$13.50. 27 bucks last check. >> let's talk tesla, coming under a bit of pressure. let's bring in paul, the managing editor at reuters who has written extensively about the auto industry for 25 years. call last evening. he says, i never heard one say this, we can drive demand up at will. who says that? i can drive up demand at will. are you -- are you a buyer of this stock? >> well, you know, the question i guess, this stock makes -- at the current valuation, this stock makes sense, really, only if you believe that in 2017 their new model 3 can revolutionize the car business by being the first careenbly priced, $35,000, that goes 200 miles to a charge. and so we're not going to really know until 2017. meanwhile any hiccup is going to hurt this stock. >> what do you believe? you follow this stuff.

you know the technology. is it a reasonable assumption they'll have this in 2017? >> it is a reasonable assumption but look it's like if you go to the racetrack, okay, and you put a long shot bet on some long shot bets pay off. a lot has to go right between now and then. now look, it's also true that this company has come a lot further than anyone expected. so, you know, they've delivered so far. they've also say that, you know, by the end of next year they're going to have -- be building cars at the rate of 100,000 a year. that's before they get that mass model model 3 on. so, it's -- it's just it's a big bet but is it a crazy bet? maybe not. >> paul your colleagues at breaking views suggest that the stock should really be worth about a third of its current price. >> reuters breaking views, they did an item yesterday, after the earnings came out. it was a very smart item. it basically said look, you know, no matter what this company does, it's not going to

escape the valuations of the auto industry. and again, they said it's really based on current conditions and everything, instead of a $28 billion market cap, it ought to be closer to a $9 billion market cap. >> right. >> so really you're paying for that price now is that industry disruptor factor. really disrupt the industry. >> one other technology question for you. elon musk is betting big on batteries. toyota is recently coming out with a hydrogen fuel cell. this is sort of the holy grail. is that real? >> right. >> is that vehicle going to compete, and does that mean that actually that would be the next technology after batteries? >> well, maybe even before batteries, to be honest with you. so elon musk has derided the hydrogen fuel cell idea. but the truth is, the man behind the fuel cell development at toyota is mr. imada the father of the prius. this man has credibility. he's done it before.

he's revolutionized the auto industry before and i would not rule this out at all. >> okay. paul, thank you for joining us this morning. helping us through this. >> great to be with you. >> appreciate it. see you soon. >> all right joining us right now on the "squawk" news line, jeff sout the chief investment strategist at raymond james. jeff we need your opinion. what's happening here. we're seeing declines once again this morning in the futures after the big sell-off for the markets yesterday. is there reason to be concerned if you're an investor? >> i don't think there's a lot of reason to be concerned if you're an investor because i continue to think that we're in to one of the multiyear secular bull markets. that said you hit the upside target zone of 1950 to 1975 that was generated by the reversal day that happened on april 15th at s&p 1816, so you overshot that upside zone a little bit. but, we're in to the 64, 65th month if you study the scheme of things over the years, they have been difficult and topping months for the equity markets.

i've always maintained on your show that sometime this year we were due for a 10% to 12% decline. whether this is it, i don't know. it kind of feels like it to me. the troops have been retreating. i.e. the russell 2000, while the generals were advancing the s&p, the volatility index has picked up here, and i have learned one thing over 44 years in this business, never on a friday. and that means that once these markets get in to a funk like think did in this week, they rarely bottom on a friday. they give the investors over the weekend the chance to brood about their losses and they tend to show up the first part of next week in sell mode. all in all just like a heart attack patient doesn't get right up off the gurney and run the 100 yard dash. >> would you tell people to be buying on this or would you say wait, because i think there's a bigger decline to come? >> i have told people since the first and second week of july they should be weeding out stocks in their plel yos that have not performed in this 40%-plus rally that we've had since june of 2012 without a 10%

pullback. so, no, i would not be buying right here. i do think we have a decent chance of having this s&p pull in to the mid 1800s. >> can you explain this? we're going to get the jobs number at 8:30. a good number is going to settle this down or not? >> if they get a good number i think they'll try and rally because the mcclellan oscillator on the new york stock exchange is pretty oversold right here. i do not trust it. i think there's been a psychology change on short-term to intermediate-term business basis and i think we have some more downside here before we level out the loss of supply and demand. >> jeff, thanks for calling in today. great talking to you. >> you bet. >> up next results from dow component procter & gamble and the first on cnbc interview with cfo john muller. before that, though, heading to the "squawk" set we have dallas fed president richard fischer. he will be joining us for the next hour. we have a lot to talk about, a lot of ground to cover after this week's fed meeting, the gdp report, the recent state of the markets. "squawk box" will be right back.

good morning, everybody. welcome back to "squawk box" i'm becky quick along with andrew ross sorkin and steve liesman. joe is off for the week. we do have some breaking news this morning. the global markets continue to be under major pressure this morning. taking a look at the futures they're down again. you might have expected a rebound after the big declines we saw yesterday. this morning the dow futures down by about 93 points below fair value. the s&p futures off by over 10 points. nasdaq down by 23 points. in europe this morning, some of that bleedoff continuing. the dax in germany down by 2%. the ftse down by 1.5%.

and in italy the mib is down 1%. in asia red arrows there, not as big as the declines that we saw in the united states, where the s&p yesterday was off by 2% but you did see the hang seng down by about 1% and declines with the nikkei and the shanghai, as well. we've been watching the ten-year note because this has been the interesting one. the yield at this point sitting at 2.582%. this of course follows a major sell-off on wall street yesterday. all of the things we'd been watching. no one seemed to know what happened. 97% of the s&p 500. 96% of the nasdaq 100. and 100% of the dow 30 components closing lower. volume and volatility, both back with a vengeance. 4.3 billion shares traded on the nyse yesterday. more than a billion above the average that we normally see. >> see, the whole sell in may thing -- >> if you sold in may you missed those gains. you had to wait until the end of the july to really sell. >> real quick. let's bring in john brady as

managing director of r.j. o'brien for his thoughts on the sell-off. help us here. explain it if you could to us, john. what do you attribute it to. >> andrew i think there's a confluence of events taking place above and beyond the obvious which is the geopolitical tensions both in the middle east, and ukraine, russia. i personally think that the economic is at an inflection point and specifically, we noted that the equity market sell-off really accelerated yesterday following the report of the employment cost index, which as you know for q2 came in at plus 0.7% much higher than most expectations on the street. there's a real battle going on within monetary policy and the yield curve and specifically the nexus of where volatility in the markets will most likely come from next. and the problem is, or the challenge is, is that fed policymakers are having a difficult time determining exactly how tight the labor market is. >> we have one of those fed policymakers at the tail. we're going to get to him in just a moment.

but if you could help me with this. if we get a good jobs number, even a hot number, is good news good news? or is it possible that good news is bad news because the view will be that the fed is going to act sooner? >> so, good news is bad news in the short run. good news is good news in the medium and longer-term. this is what the fed wanted. this is what the markets wanted. they want a tightening labor market and upside inflationary pressures. remember the last four or five years have been dictated by inflationary fears. so inflation is easier from a central bank perspective to chase and to bottle than trying to battle the deflation demon. so in the near-term, a very strong number today will probably limit further sell-off in equities. the natural correction. but in the longer-term. you know, an economy that's showing strong job growth and higher wage growth is a longer-term positive. >> john? >> yes. >> so final question, is your

sense -- and we just have an analyst on earlier that suggested we could be in for a 10% correction here. that this is just the beginning, this is just a blip. where are you? >> andrew, listen, i think that it's important to remember that let's say in the s&p 500 your low in may was 1854.50. and we trade 1913 a quarter now. i think another 5% is much more logical and accepting. i think 10% is a little bit of a stretch. you know you get down to the kind of levels around 1853. you got your 200-day moving average as well. fabulous buying opportunity. but in the longer-term, equity still are not overly -- the valuation matters are still not stretched. so we use it as a buying opportunity. >> we're going to leave the conversation there. thank you for helping us through this this morning. >> you bet. >> let's tell you quickly, procter & gamble out with earnings this morning. looks like they're coming in with he of 89 cents. street was looking for 91 cents. revenue at $21.6 billion. the street estimate the consensus was for $20.48

billion. so that's slightly below what that consensus estimate was. you do see the stock dunn about 1% in the premarket. a dow component. not surprising given the pressure we're looking across the board with some of these. we're going to talk with john muller the cfo of procter & gamble in just a moment. one of the things they talk about is the 2015 guidance. they're saying procter & gamble expejts organic sales growth in the low to mid single digit range. net sales growth expected to be in the low single digit range including a negative one-point impact from foreign exchange. obviously currency's been a big impact on any of these multinationals. they note that the earnings for 2015 will be heavily influenced by the variation of foreign exchange impacts from period to period. they expect the most significant negative impact from foreign exchange in the july to september 2014 quarter. so that's what we're in right now. at the current spot rates, procter & gamble expects foreign exchange to be you'vely neutral

in 2015. we'll have more on that in just a moment. looks like that stock is up by 1% at this point as people dig through that earnings report. as we watch the most widely watched jobs report, richard fisher is the president of the federal reserve bank of dallas, and richard it's great to have you here. >> thank you, becky. >> always wonderful to see you. >> we've been trying to figure out why the market's down and one thing we've heard from several people, this is just one of many reasons, they're concerned that the fed is going to have to raise rates a lot faster than they'd been anticipating, a lot faster than people thad been expecting at this point. are market participants right to think that? >> well, first i thought andrew's explanation reading from one of the newspapers this morning was that nobody knows why the market is down. they're confused. but your question has to do with our policy intentions. and as you know, i can only speak for myself. >> sure. >> you know what my views are. and at the last meeting i felt, as i listened to the discussion at the table, that my views were being digested by more and more

participants. and that is, the numbers have been better. we've had, if you look at moving averages which we like to look at the employment situation is better. you just saw the employment cost index come out yesterday. so it would seem to me, and i have been arguing this, that the date of so-called liftoff has been moved forward. we're seeing the risk of deflation and all the things we were worried about as a committee and you were hearing from business leaders in the private sector, that has begun to evaporate. it hasn't disappeared. but it has slipped way off the radar scope. so, things are better. it's what we wanted. and we're moving in the right direction. and it's up to the market to discount whatever they think reading through the entrails when the minutes are released three weeks from now they can decide how they feel then. >> but you know what that you -- >> but the numbers have been positive. this is the most important point. good news, andrew, is good news.

and we care about the real economy. >> what you said is very telling, though. you have felt this way for awhile. but -- >> eventually someone's right. eventually i'll be right. >> you said that you feel like others around the table are digesting what you're saying. >> i'm speaking for myself. my sensibility, sitting through those meetings for two days, as i do, as a full participant, as a voter, i was rather pleased, by the way, with the statement as it came out. because you know what my views are. i gave a speech on this on the 16th, the wall street reprinted it on monday. at least some excerpts that they pulled out of it. and i thought i expressed myself thoroughly there and i was encouraged with our discussion that there seems to be a sense that we are, indeed, moving in that direction. >> liftoff has been moved forward. >> i didn't say that. what i said was that i think we are moving in the direction of if the numbers continue to show this kind of good behavior, then one would expect that we would lift off a little bit earlier

than we thought just the last time we met when we released our economic projections. >> you said in your op-ed -- in your speech which was excerpted, you were increasingly at odds with your colleagues. >> right. >> after -- >> i don't feel at odds -- >> you feel less at odds with your colleagues now as a result of the meeting? >> well said. >> what -- >> well -- i don't want to put words in your mouth. what specifically from that meeting, puts you less at odds with your colleagues? >> again i'm not going to talk about what others said at the table. >> oh, sure. >> i think the general tone is we're getting confirmation through the data, and the anecdotal evidence we get all of us talk to business leaders around the country, that's our style now. i'm very happy about that, by the way, because i started doing that a long, long time ago. other colleagues do it very well. there's a little more confidence out there and again the downside, deflation, zero growth, slipping in to negative growth, you don't hear much talk about that anymore.

either outside when we consult with people. you don't see it in the data and you don't hear much discuss about it. >> there was a new concept introduced in to the statement. it had been out there, obviously, in the -- in the world for awhile. this idea of labor slack, essentially. >> right. >> in your opinion, how much of it is out there? and is it something that you think is significant for policy -- >> it's not clear how much is out there. we don't know what the natural rate of unemployment, which we've been looking at always has been. the congressional budget office has gone back to the very critical year of 1949. i'll tell you why it's a critical year. it's the year i was born. they went back to 1949 and we've had a change, it's never gotten below 5%, and it's been up to the high 6s in periods of stress. so particularly during the carter administration and so on. we're moving in that direction. it's hard to drive an economy below the natural rate without creating inflationary pressures.

the real test will be in terms of the wage data that shows us the cost of labor. we saw some numbers yesterday that showed a lift. it's very hard to tell what spare capacity is. but it clearly is starting to narrow. and the direction and sign is what's important. >> when you say that you hear anecdotally, i know you talk to business leaders and have for a long time. is there less concern? are they more willing to put their money where their mouth is and increase capital expenditures? >> that's the key and where. so let's get on my favorite hobby horse. you can't ask for more accommodative policy than we've provided. we made money dirt cheap and abundant. the question is how does it get utilized to create more american jobs. then we have tax and other fiscal and regulatory disincentives for business to put their work here in this country. you have to parse through the report -- was it here? that's the interesting part.

where is money being made and where money is made is where you put money back to work. as far as looking forward. so having said all that, we are seeing progress here in the united states. here in britain in particular. i think we're the leading race horses on the track. >> you're pretty calm and cool right now. i mean i've seen you -- >> i'm cool calm -- >> i've seen you a little more agitated. a little bit more concerned about where policy is. >> yeah. >> after this meeting. you feel like it's going your way and you're not concerned that the fed is on the verge of a major mistake of being too accommodative. is that fair way to characterize how you feel this morning about policy? >> i am very comfortable with the way janet yellen chairs that committee. i wasn't as comfortable with ben. i think she's been extremely thoughtful. she pulls out of everybody their exact thoughts and then she summarizes in a way that even has taken ben's great ability to do that to even higher art form.

so, yeah, i'm very pleased at where we seem to be moving this is again my own opinion and as i expressed in that piece i didn't feel the need for example to dissent at this meeting. because what i heard and then what we stated for the most part, there might be some wording differences -- >> i had you pegged as a dissenter. i thought your comment -- >> he's so cool. he's like -- >> cool as a cucumber. >> it's amazing. >> usually a cool guy. >> what was -- what was the change in the language that made you feel good about it? >> i think the way that we describe described being closer to 2% target on inflation. in the first paragraph discussing where things were some wording changes took place. >> so -- >> and if you remember, chair yellen just testified a couple weeks ago, so this is hard for people to understand, there's a limit to what you can change when you've just appear before congress. so the point is the movement, the gradual movement, and as you

know, i feel personally that we're closer to liftoff than we were, people felt we were, the market assumed we were, sometime late in 2015. i believe personally we've moved that forward significantly. >> you can't speak for the full committee -- >> significantly? >> to you there was a very different tone and there were keys that people should look to to say yeah, we are recognizing what's happening with the data and we're trying to make sure you realize that? >> i am happy with my position -- >> i'm sorry, that word significantly really sticks out at me. what is -- >> of course it does. >> let's save it for after the break. >> save it. >> what is significantly mean? >> it's a significant question. >> that's right. we'll go to the oxford english dictionary and find out. >> richard fisher again we'll be talking to him throughout the hour. we'll have much more when we come back. >> also procter & gamble releasing quarterly results just moments ago. earnings of 95 cents ex-items beating the street by four cents. we've got the cfo when we return right here first on cnbc with a look inside those numbers and as we head to that break check out

the futures. crazy day after yesterday. dow looks like it would open down about 99 points. but we do have the jobs report at 8:30 and everything could go in different directions then. in a world that's changing faster than ever, 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.

welcome back to "squawk box" everybody. again you hear the breaking news there because we are keeping a close watch on what's been happening with the futures today. under pressure once again. dow futures at this point down by about 87 points below fair value. it's a big number but it's off the worst levels of the day. we had seen down by about 117 points at one point. that comes after what we saw yesterday, a decline of 317 points for the dow. the s&p futures are also down this morning, down by just over 10 points. nasdaq off by 23. >> time now to take the pulse of the consumer. procter & gamble posting quarterly results just moments ago. they reported earnings topping analyst estimates. joining us now is the cfo of p&g and also a member of c innocence's global cfo council. still with us dallas fed president richard fisher. we still want to make sense of what you're seeing globally in terms of how you're feeling as a company and also as a consumer. let's go through the numbers first, john. on your earnings you beat on the

bottom line you missed by the two about $300 million on the top line? >> that's right. we just completed our fiscal year. on our fiscal year basis we were up 3% on the top line. 5% per share growth. 14% per share growth on a constant currency basis. we increased our dividend for the 58th consecutive year up 7% repurchased $6 billion worth of stock. on the quarter, organic sales up 2%. earnings per share up 25% on a constant currency basis all of that reflecting the strong earnings underlying earnings power of our productivity and cost savings program. >> tell us just broadly speaking about the globe tell us where you're seeing strength. tell us where you're seeing weakness, and tell us on a morning after the markets, and i know the markets don't matter to you specifically, where there's a little bit more anxiety than there had been the way you're looking at the world. >> well, it obviously varies by category. we see opportunities globally, quite frankly, developing

markets continue to grow for us 7% last fiscal year. 7% last quarter. but there are also significant developed market opportunities. market growth rates in our product categories have come down about a point over the last year and have come down sequential sequentially. but markets are still growing 3% globally, mid signals to high signals in developing markets where 45% of our volume currently ships. so it's a mixed bag but generally, manageable. >> you said at the -- i don't know if it was you but the company said that the deutsche bank global consumer conference about your objectives by the end of 2015 in enrollment reduction goals which basically means job cuts. where do you stand? on that front? >> well, we announced in february of 2012 a $10 billion five year cost savings program, a cost -- all elements of costs. costs of goods sold. marketing expense as well as overhead expenditures and we're going to accelerate and exceed

those targets. so we're very happy with where we stand. that's what allowed us to overcome significant foreign exchange head winds and still deliver good numbers on both the year and the quarter. >> but my understanding was that the company -- you guys had said that you would cut 8750 rolls about 15% of the workforce. but my understanding is the target is 16% to 22%. >> yeah, and it as of july 1st we're at 16%. so we're within target and that's happened over the last two years. and we'll use those savings now to fuel both bottom line performance as well as top line growth. >> john is that you -- are those u.s. job cuts? >> no that's global. >> so what's the u.s. portion of that? >> i honestly don't have the breakdown. but you should assume it's proportional. >> what is the job market like right now? i assume inside the overall cuts there's hiring going on, as well. you hear from a lot of executives that it's difficult

to find skilled workers and that you have to pay more for skilled workers. are you guys finding that? >> well, we're in maybe a little bit of a privileged position. we have almost a million applications a year for about 3,000 jobs. so we continue to hire very qualified candidates across the globe and are pleased with the quality of talent -- >> did you say -- >> did you say a million applicants for 3,000 jobs, jon? you're like tougher to get into than harvard. >> yeah, i couldn't get hired today, becky, that's for sure. >> score one for janet yellen on that one. talked about labor slack. >> so you're not -- >> let me ask you a separate question. are you -- you know, there's a big conversation going on across the country that somehow we can't find enough talented people in specific sectors. of your -- if you're getting a million resumes, are you having that problem? >> no, we're not having a problem sourcing talent. we're very happy with the quality of the talent that we're sourcing on a global basis.

of course, there are always pinch points here or there or in individual markets. broadly speaking it's going pretty well. >> john, what's it feel like -- oh, i'm sorry. i was just going to ask, what's it feel like? we just had a 4% gdp number. does it feel like in the u.s. a 4% economy? >> to me it feels a bit choppy. as you all know, the prior gdp number, prior quarter was minus 2. and so there's a little bit of it feels, in my seat, a little bit choppy, and i would say that's true across the globe, with some of the geopolitical events, et cetera. but, against that chop, continued opportunity for growth on both top and bottom line. >> jon, i don't know if you know this, but your team sent us some razors, and i have here the gillette -- i don't know what you shaved with this morning. this is the gillette fusion pro glide power -- >> we talked to him about it last quarter. >> it's got a battery. is that five blades?

>> five blades. >> what is the price tag of this? this razor. >> it's actually very reasonable. about $10 for the razor. we launched that around father's day in june. in the month of june the male razor category, the category in the united states was up 30 points. and we started to see cartridge share grow as well -- >> so this product is ten bucks and by the way -- >> it's not the razor it's the blades. >> it only comes with one -- >> obviously there's five little blades. >> we've got more of those, andrew. >> one cartridge, thank you. how much does a cartridge cost? >> it depends on exactly what cartridge you buy and what configuration. but on average, shaving with that razor, which is the best available shave, will cost about $1 a week. >> $1 a week. okay. there you have it. jon moellor thank you for joining us. cfo of p&g. thank you for the razor. for more on our global cfo council check out

cfocouncil.cnbc.com. >> coming up the countdown to the jobs report, including the search for jobs and cnbc's top state for business. and again, red arrows this morning in the u.s. futures. right now the dow futures down by about 97 points below fair value. s&p futures off by 12. the markets picking up where they left off after yesterday's slide. chocolate is very individual. white chocolate lovers don't like dark chocolate.

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welcome back to "squawk box" this morning. our top story, the global market sell-off. futures pointing to a sharply lower open again on wall street. although futures are off their lows of the morning but the dow looks like it will fall sharper into the red for the year right now dow looks like it would open off close to 90 points. nasdaq off about 24 points and the s&p 500 off about 11 points. the dow and s&p had their first monthly decline since january, both down nearly 2% during july. today's test for the markets, the july jobs report. that's just about an hour away at this point. forecasters say the economy

likely added 230,000 jobs last month, dawn from a gain of 288,000 jobs in june, and we will try to see whether good news is good news or good news turns out to be bad news. >> all right let's stay on the topic of jobs. in the competitive world of global manufacturing, every minute of down time is a dollar lost. so companies are always looking for ways to cut costs, and improve efficiencies. this is where ats comes in. mary thompson joins us from augusta, georgia, with more. if you recall georgia topped the cnbc list of top states for business. mary, how you doing today? >> good, becky. we're here at a specialized vehicles plant where for the last eleven years they've been using advanced technology solutions to repair and maintain the machines they use to make these easy go golf carts as well as the curbman vehicles and the bad boy buggy all-terrain vehicles made here at this facility. i guess you could call it domestic outsourcing. but peoria based ats says demand is growing for its services.

here's ats vice president. >> since our inception in 1985, we've actually grown to 3,000 employees and had an annual average growth rate of about 18%. i would say the demand for our product has been accelerating and it really is this skill gap issue that's one of the primary drivers. along with just global competition in the manufacturing environment. >> demand is so strong ats is hiring 500 workers this year. its technicians are trained to fix and maintain the multiple machines you'd find on a client's factory floor. the value proposition to a client being if you put the maintenance in ats' hands it frees the client up to focus on doing what they do best. like producing this light transportation vehicles at augusta. >> and the cost side, we are just more efficient. we bring to bear better processes, and tools, and

disciplines, and through our predictive services, we prevent things from breaking, and it's a lot less expensive to prevent something from breaking than fixing it after it's broken. >> ats employees can be found at more than 100 factories in the u.s., uk, canada and mexico. 16 of them work here at techstron. they work in teams of six to 60 depending on the type of job and the length of the contract. out for some time we've been hearing from employers how difficult it is to find the skilled labor at ats needs and ats says it has been difficult to find skilled labor in certain parts of the country, and as a result, they've had to pay a premium to these workers, but they say nationally, wages have been flat for the past five years, because there's so much slack in other parts of the labor market here in the u.s. now coming up on power lunch i'm going to have techs tron's side of the story while handing over the maintenance reins to ats was good for their business. that's coming up on power lunch. >> thank you, mary.

let's get back to our very special guest this morning to get a read on job creation in his state in a sense of the lone star state economy. richard fisher is president of the federal reserve bank of dallas. before we do that, though, we teased. >> i know. it's a big tease. >> there was a big tease. you used the word significant. >> yeah. >> and we were trying to understand. >> you could say significant or incremental. it all depends on how the data unfolds. and as far as i'm concerned, in my own personal view, as i've expressed publicly in my speeches, and also internally in our deliberations, i think things are moving faster. we'll see if the data confirms that. thus far the data has been confirming what i've been saying. and so you could say incremental. you could say significant. the point is, if things continue this way, i believe personally that we should move up the date of liftoff. so let's drop it there. i want to drag about texas. >> sorry, we can't drop it there because there's at least one more follow-up here. the market consensus right now is judged for example in the cnbc fed survey, i'm sure you

follow. >> every day. >> well this only comes out every six weeks. >> that's why i follow it every day. >> it's june 2015 or so. significantly, does that mean you think it's possible to begin raising rates in the first part of 2015? >> personally -- >> for later -- >> personally? >> i do believe it's possible. and if we continue moving in this direction i believe it's very possible. >> beginning of next year would be the place you would begin to raise -- >> sometime early next year, yeah. >> could you explain to us or give us your view on the trajectory which is also of huge interest. once rates begin to rise, obviously data dependent. how fast do they rise? >> it's not only data dependent. we also listen very carefully to what we're hearing in the private sector. there's little anecdotal evidence there, too. i use the anecdote of duck shooting. if you're going to bag a mallard you have to be ahead of the mallard. you don't shoot where they currently are. so we have to anticipate. we have to see the direction of the data. the entrails of the data what it's telling us. and again things are just moving in the right direction.

that's a good thing. for the real economy. and it has been enabled by uber cheap money, and abundant money. don't forget the ten-year bond you guys talk about, it's still below 2.60. this is an amazing number historically. >> we have a guest who was on earlier this morning who thinks it will be at 2% by the end of the year, maybe below. >> that was relative close, too. in the context of europe. so we're an attractive place to be. as you saw in georgia i'm very happy for georgia. we're becoming more like texas. it's wonderful. but they're the beneficiary of the fact that we do have labor that's very competitive in the united states now. and china has priced itself out of the market. so we're moving back to the northern hemisphere, at least. and we're here, mexico, canada, the united states. we're doing better and better and better. >> there's a part of the statement that you have voted for that i've been surprised voted for. it's the one that says that once we return to normal employment and normal inflation. >> right. >> we expect rates to be below normal. do you -- is that your view that

you won't get back to a neutral funds rate even when employment and inflation are neutral? >> i think that's debatable. and future meetings. and also a considerable time as to how long it will be before we lift rates. these are debating points. these are important. and if and as -- if and as we change that, that will send signals to the market. i like right now personally sending signals to market through language. i think we're doing that. i think the last statement indicated that we are more comfortable than we were before. that's the reason i didn't dissent. i was quite happy with the language. it was carefully crafted by the committee. >> can i ask you what your long run rate is for the fed funds? >> no. >> i can ask -- >> i can't answer. >> when we get the jobs number you'll be gone before we get the jobs number. >> i won't be gone permanently. >> you won't be on the set with us. we should clarify. a couple of economists this morning told us watch that average hourly earnings very closely. do you do that too? >> i think the employment cost index or the cost of employment is very important. we had a good number came out yesterday. i think these are the things to watch.

one of the things i'm hearing from the ceos that i speak to and you know i survey them very broadly, across the country not just in my district, is people are quitting and looking for other jobs. so-called quit ratio has been validated by my anecdotal evidence. and then secondly once somebody leaves it is hard -- takes longer now to replace them. and i think you've seen that in some of the other surveys that have been taken. so, these are good things from the standpoint, shows that there's a more robust labor market. it's not robust enough. that's the point that we have made as a committee. but things are improving moving in the right direction, the sign is appropriate and proper, and i expect it to continue. >> okay, richard. we're going to let you brag for a moment. >> texas. >> about the state of texas and all the businesses there. >> i'm very happy for georgia, first of all. if you really dissect the data that you all put out they still lag us in a couple things. one is use of technology. we're number one. and by the way we've been number one for a long time. we've created eight times as many jobs for every job created

in georgia. it's a smaller state. in the last five years. and if you look at the denominator for unemployment, ours in the number of people that are available to work, ours has grown 13 times faster than that of georgia in the last couple of years. having said all that, when you take all the little measurements you have in there -- by the way the cost of living is number one lowest in texas compared to georgia. so they lag us in certain areas but this is good. i have said over and over again, steve, less cal fortunate indication for america, for texasification. george is a great place. >> here's a softball. it's all energy. how can you brag about texas economy when there's an energy boom going on. what makes you better above and beyond? >> we're highly diversified economy. our leading job creation, if you look at the numbers, texas is blessed with energy. but if you look at business and financial services, the health care sector, believe it or not

steve, tourism is a big business in texas. so, we have 24, 25, 26 million people. it's a large place. we produce the automatic of australia and spain. but look, all kudos to georgia. i'd like to see more states do as well as we do. even if they're tiny little states like georgia. >> did you say australia and spain? >> yes. >> wow. >> i love texas. we all love texas. but i want to read you something, this is from the dallas morning news. this -- because this is the critique. this is the critique among sort of the progressive crowd. who would say texas notoriously ranks last among states for the percentage of people with health insurance coverage, and the share of adults with at least a high school degree. poverty rate is worse than the national average. >> true. >> and the conditions in parts of the state, they say rio grande valley where the unemployment rate is in the double digits are certainly nothing to brag about. what do you say about that piece of it? and what that means generationally 10, 20, 30 years from now. >> this is the thing. they're right.

and yet, people vote with their feet andrew and we have a rush of people come nothing our state. by one accounting a million californians have moved to texas in the last several years. last ten years. so, -- >> but texas has always been great about low taxes, and frankly low service. but that's been part of -- >> that's part of the deal. >> that's part of the deal. >> you don't have to come to texas. you can go to someplace else where -- >> the low -- >> work is the route to dignity my friend. having said that, i have been very worried about our educational structure in texas. the need to become the top state as far as education. we are lagging significantly. but you know, we had some discussion about my becoming chancellor of the university of texas system. the texas university system has a $30 billion endowment and here's a number that will boggle your mind. if it keeps going the way it's going we'll have a $100 billion endowment. we will set standard for higher

education, public education in texas. there's a good chance for the next chancellor to set the standard for america. >> i have to ask you an inside question about fomc meetings. two guys named fisher on the committee. >> all we need is about 17 more. >> when somebodies says fisher do you guys both answer? >> well, he's governor fischer, plus he misspells his name. he has a "c" in there. >> you have a $30 billion endowment right now? >> yes, university of texas system, yes, sir. >> what's harvard was because i was just looking -- >> i'm an overseer at harvard. >> what's the number? >> $36 billion. >> wow. >> now, remember, harvard is one university. but it has 15 hospitals affiliated with it. u.t. system has six hospitals but nine different universities. so it's a system for the state. >> right. okay. >> very important social role and south texas is where it will play its most important role. >> there's some really cool places where there are schools like university of texas permian

bayen. >> proud of georgia, good on them. keep competing for texas. >> we're going to have more from richard throughout the rest of the hour. >> also a deal this morning. scientific games is buying bali technologies for $83.30 a share in cash. that's a total of $3.3 billion excluding debt. that price represents a 38% premium to bally's closing price yesterday. you could see that stock's up by about 34%. we'll continue to watch the futures this morning. a lot of red. the countdown to the next test for stocks, the jobs report, right now dow futures down by about 74 points and believe it or not that is showing improvement for the first time this morning we're seeing the s&p futures down by less than 10 -- less than 10 points down about 9 right now. ♪

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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. welcome back to "squawk box." take a look at the futures. see how the market is setting itself up after a very tough day yesterday. getting a little bit better than where it was. still not great. dow looks like it will open off about 68 points after what was a route yesterday. the s&p 500 off about nine points and nasdaq off about 19 points. of course, we are awaiting the jobs number which is going to be coming to us in just about 45

minutes. of course we will bring you, take a look at european markets, as well. you're seeing the ftse 100 off a little over a percent. everything's off about a percent. dax is almost off 2%. italy a little bit less so. >> when we come back, more from richard fisher. we've been talking to him all morning long. also at the top of the hour, moody's an letics chief economist mark zandi joins us for the rest of the show. he'll be joined by tony frat owe, austan goolsbee and peter bookbar. it is the key number for investors. we'll be right back. monday on "squawk box," group chairman and ceo harry wilson. auto sales from autonation ceo mike jackson. and the ceo of trucking giant yrc worldwide. "squawk box" starting monday at 6:00 a.m. eastern. collection is here. ♪

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i voted for plausible deniability. i didn't kill her, david. and i voted for decisive military action. ♪ america, you cast your votes. now, go to xfinity on demand and select the people's hotlist to see this summer's top 100 shows and movies. i voted! let's get back to our special guest. dallas fed president richard fisher. we've got some more thoughts from him. and richard, we've got this jobs number that's coming up in just about 40 minutes' time. a lot of people are looking at this number. it is expected to be a gain of over 200,000. if that happens it will be the sixth month in a row that we've seen that. that's the longest stretch since 1997. that's some pretty strong numbers. >> we don't know what the number's going to be. >> i will tell you this. we do a survey, we have a manufacturing survey, retail survey, service sector survey of

all the federal reserve surveys, the one closest correlation, the highest correlation of all the federal reserve surveys, by the way, with jobs, is the one we do at the dallas fed. the rest of them do a better job in certain other areas. so our numbers have been pretty strong and we'll have to see if that falls through once again with the nation's job numbers. but it would be nice to have above 200,000. and again we have to put that together with the employee cost index and some other things. and also see how the long-term unemployed are coming down, which it has been coming down. now, i think you can go too far on this. because monetary policy can only cure so many things. without good fiscal policy we can't make up for the skills mismatch. and the lack of education. there are skills mismatches out there. you can't find truck drivers in west texas not because they can't just pass the drug test but because they can't do four function math. >> why do you -- >> you have to read a dial. if you're a frito-lay truck driver you're running an inventory on that little truck.

>> right. >> so -- or we have a shortage for example in my district, which is a robust growth district of auditors. very exciting people, by the way. of auditors, engineers, i.t. professionals. across the spectrum, we're seeing labor and skill shortages. we cannot repair that through monetary policy. >> i do think, though, that you are looking at two labor markets. one where you have a hard time finding people with skilled jobs. one without. >> right. >> and it seems to me, past what i've heard yellen and others speak, they think that they have to -- okay you say it's a lack of fiscal policy. but in absence of good fiscal policy, does the fed have to maintain that status to try and make up for what they -- >> there's only so much monetary policy can do. and i would say this, because right now we're going, as you know, we just went through hearings in the lower house about more transparency, and rules and everything else. i wish they'd just do their job. which is fiscal policy, change the regular whatter to structures. instead, they pick on us.

we are necessary but not sufficient. without good fiscal policy, monetary policy does not work. that's the job of our elected officials in the congress, the power house and upper house. and those that create the regs, which are congress people. >> richard, let me push back just a little bit and give you what some people say the other side is, which is that the biggest threat to this country right now is long-term unemployment. you have a situation where people leave the workforce, never come back, remain permanently on some form of federal funding. or state funding as it were, and lowering the growth potential of the economy permanently. in this scenario the fed would be justified in running a hot economy. letting wages run. letting inflation run to a point that brings these people back into the workforce. >> i don't agree with that. i think if you look historically, if we get employment uber high level and try to cut it back, because creating inflationary pressures, inflationary pressures, every time that's been done, it's not

a giant sample, fortunately, but we've driven the economy in a recessi recession. you can't overshoot and then try to correct. and if you see the unemployment rate go up by 0.3% and it starts moving in that direction it shifts the way businesses begin to think about their own workforce, and their own future. and it accelerates. i don't buy that argument that we should run an overheated economy to tolerate inflation highly above 2%. which is our target. in order to increase employment because eventually it gets out of hand. we've had experience with this before. and it's a dangerous place to go in my opinion. >> we were talking about texas. just a few minutes ago. and one of the things that kind of occurred to us, what happens with immigration, with the -- with what you're seeing with the influx of people coming in. how does that affect your state? how do you think it affects the nation? >> you're talking about people from california, michigan, new york and united states. that's a majority of our immigration, by the way. they're coming to look for jobs. people coming across the border to look for jobs and for safety.

more people are coming from other states than are coming across the border. >> but it -- >> so that's the good stuff. >> but it is in the headlines right now. >> absolutely. >> we have a massive influx -- >> this is the land of the free. my parents came here for freedom. so i understand it economically speaking and that's my job. i'm not a politician. thank god. they can deal with it however they wish to deal for the headlines. but the point is, from an economic standpoint, it should contain costs, by the way. and it can fulfill jobs that we cannot fulfill with our own education system or that people just don't want to do at the low income scale. so there's a balance here. and i worry about the, you know, the politics of this. the economics of it. i think are to our benefit. but clearly we can't take everybody from the world into our country, because it is the greatest country in the world. >> but economically -- >> it lowers your costs, definitely. purely economically speaking. now again there are other issues. there's all the issues that politicians have to worry about. that's their job, not mine.

>> do you have a take or fix on the inversion craze that seems to be taking place? >> jack kennedy, one of the most memorable speeches he made is we don't have to build a wall around the united states to keep people in. i don't think that's sensible. create a better tax regime -- to use the monetary policy that is very accommodative to put our own people back to work -- >> do you think that's plausible? >> i'd love to see that happen. >> do you think it's plausible that will happen over the next two years? >> i seriously doubt if they do this and push it too hard we're going to see more people invest outside the united states than inside the united states. to me it just, it's contra logical. >> you mean just blocking inversions al together? >> yeah. >> yeah. i mean, why do people do this? because the tax regime is better elsewhere. create a better tax regime here and again please drive fiscal policy so that people will take advantage of the monetary policy that we made hyperaccommodative to more americans to put them back to work. >> president fisher i want to thank you very much for being with us this morning. it's been a pleasure. >> thank you. >> i want to thank you, too.

it's fantastic. >> i want to say it was significant. >> well, that's very good. well it could be incremental. >> thank you. appreciate it. >> what you looking at? >> oh, i have to read something here. coming up, they always do this to me. the final countdown. the hair music thing. investors keying in on jobs today. it's also jerry garcia's birthday today. the government employment report due out at 8:30. our panelists standing by with predictions and analysis of economic conditions. futures were under pressure. almost halving their losses.

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welcome back to "squawk box" here on cnbc, first in business worldwide. steve liesman has some breaking news right now. steve? >> philly fed president charles plosser issuing an explanation of his dissent earlier this week. this has become common now and plosser explaining that he objected to the language in considerable time period language in the statement saying it was time dependent. says the pace of bond buying reduction and the language, neither has changed as the economy's improved. he said the setting of the funds rate remains behind what i consider, i being plosser, consider to be appropriate. adding that the economy has improved even faster than i thought last december, when he

thought that last december the funds rate should be 1.25% by year end this year, i can tell you that i looked because i saw this, that the top forecast for the funds rate at the end of this year, is 1%. i'm thinking that's charlie plosser. he says we're 18 months ahead. 18 that's a year and a half of where the committee thought it would be in december. so, that's interesting, and trying to put that in context of richard fisher's comments who thinks that if things go the way we're going we could have liftoff in early 2015. we have some tape from robert fisher earlier this hour. >> i think the way that we've described being closer to 2% target on inflation, very important. that was in the second paragraph there, and the first paragraph in terms of describing where things were, some wording changes took place. and if you remember, chair yellen just testified a couple weeks ago, so, this is hard for people to understand. there's a limit to what you can change when you just appear

before congress. so it's -- the point is the movement, the gradual movement, and as you know, i feel personally that we're closer to liftoff than we were. people felt we were. the market assumed we were, sometime late in 2015. i believe personally we've moved that forward significantly. >> richard fisher right here making news saying that we could be significantly earlier. >> yep. >> early 2015. charles plosser says we are 18 months ahead of where we thought we would be. we have stronger gdp growth. we have a jobs number coming out in less than half an hour. i thought richard fisher was less agitated about the current stance of policy than he had been in the past. >> i think that's also because he thinks thatted fed was clearly sending signals that the language that came out -- >> this is my question. why is richard fisher less agitated? is he less agitated because as a

committee moving up? >> he also said he thought the committee was listening to him more when he was making his points. now again he's speaking for himself -- >> what's your takeaway, becky? >> takeaway, interest rates are going up faster than you thought. >> maybe. you have to remember these are two people who have been ahead of the curve for a long time. so you go back to, are they -- >> ahead of the curve means that they have been early and not making the right calls. >> they have been urging for a long time for this to happen. they seem to think they're getting traction now. we'll see. >> and this has got to be, by the way, a big part of why markets are under pressure. >> right, exactly. we have been looking at the stock market down again, despite the big declines we saw yesterday, we are not seeing a big snapback this morning. right now dow futures are down by about 68 points. s&p futures off by nine points. if you're just waking up this is not the worst levels of the session. we were looking at the dow futures down by about 117 points at one moment earlier this morning. joining us on the "squawk" news line is richard bernstein the

ceo of the eponymously named richard beern steen advisers. why have we seen all of a sudden this much concern in stocks? >> well, you know, becky good morning, and i think it's a number of different things. but i think what's very important is one has to remember that investors had been much more worried about protecting the downsides of accentuating the upside. and any time you see volatility start to rise, i won't say people panic, that's way too strong. but people are very fearful that we're starting to replay 2008 all over again. this has been a consistent theme, really, throughout the entire bull market. that we have these spasms from point and point in time where people really start worrying that, uh-oh, it's all over, and i'm not protected enough on the downside. and i think that's what we're seeing again. >> you're talking about herd mentality. as soon as you see somebody moving extraordinary the exit everybody starts to run. but we've also had people tell us again and again that we

should get a 10% pullback. it's something that hasn't materialized. do you think that's the case this time? is this the beginning of something? >> becky, everybody's got their view of the vix and what's going on in volatility and whether it should be a 10% pullback. but there's two main factors that cause volatility to increase dramatically. and sustainably, i should say, in the stock market. one is a lack of liquidity. i think it's pretty hard to argue that there's a lack of liquidity these days when most bears have been arguing there's too much liquidity. and the other is deteriorating fundamentals. you just had richard fisher on for an hour talking about how fundamentals are improving and people are starting to listen to him on the fed. it's hard to understand how there would be deteriorating fundamentals and a lack of liquidity that would lead to a sustained increase in the vix. >> we're asking our viewers this morning are you buying or selling stocks this morning and at this point it's about 50/50. what are you this morning richard? >> i wouldn't tell you if -- i won't tell you one way or the other. >> i tell people the opposite.

>> i won't tell the opposite but i won't say anything about what we're doing in our funds right now. sorry. >> richard, fisher said, could be, if the economy continues to improve, early 2015, rate hikes. the consensus in our survey is mid 2015. >> right. >> after fisher said that the futures improved. i'm not saying fisher was responsible for that. is there a new consensus taking hold in the markets? and is 9 market going to be comfortable dbs >> p&g -- >> but they didn't freak out. >> right. >> they certainly didn't freak out. what's the consensus out there, richard, what's your view and how much does it matter? >> i don't know what the consensus is today. because obviously people are rather more emotional today than anything else. but steve you raise a very important point. and the point being that the data are increasingly showing that the economy is not just gradually improving, but maybe improving a little more than gratitude little. i mean incremental improvement, if that makes sense. and i think that that's what

people are beginning to realize. i mean, i think that, you know, our story has been that we thought there would be a very elongated cycle here. largely because of all the uncertainty among investors. all the uncertainty among corporations. right, corporations do stupid things, too, at the peak of a cycle. it's not just investors and that uncertainty would lead to an elongated cycle. naturally in any cycle, including this one, as the cycle matures you will see both corporations and investors get more confident, and of course at the peak of the cycle they'll be overconfident. so i think what we're seeing is a very normal process from, you know, complete fear to kind of interest to confidence to overconfidence. >> okay. >> richard we have to leave it there. we got the jobs number coming up in just a few minutes. >> cool. >> which is less than half an hour away at this point. consensus calls for a gain of 230,000 nonfarm payrolls. unemployment seen at i think it's 6.1. unchanged. average hourly earnings 0.2%. let's get right to our jobs

panel for thoughts on yesterday's sell-off and predictions for today and how the market would react. joining us now are guest host mark zandi, moody's analytics chief economist, peter bookbar, cnbc contributor tony fratto, austan goolsbee is also there from chicago. mark you're to my left immediately. why don't you give us your prediction. >> 210 on payroll employment. some pieback from the strong government gain last month. i think if there's a surprise it might be unemployment again. i think might go down to 6%. go to 6% handle on unemployment. the conference board survey -- >> plentiful jobs. >> a lot of jobs. people say a lot of -- so i think it was the first time in the recovery people said jobs are plentiful than are hard to get and i think that's a tell that unemployment can move a bit lower. >> peter, what your prediction

is but is there a new consensus taking hold about the fed here? >> well i think a new consensus coming kicking and screaming. i think the reality of the data is finally waking people up. we've seen about a tenth of a decline in the unemployment rate over the past 18 months. which just mathematically would get us to 5.5% by year end. the fed tells us we're not going to get there until year end next year. it's the reality of the math that people are waking up to that the fed's forecasts for next year are going to be met within the next six months. >> so what does that mean for policy? >> well, we've already seen the bond market take over some policy. the two-year note yield was 20 basis points last may. it was 57 basis points at the peak this week. so the short end of the curve has already started the tightening process. >> you know, i go ooh i'm really scared. a quarter point. >> it's the direction of change that matters. a mean look what the market's done. >> it's the level that matters, too. >> when you create an economy -- >> in the long-term. in the short-term -- >> zero rates and qe it doesn't

change much of a -- of a delta to cause an impact. >> the important thing is the ten-year bond only up ten basis points. i mean that's the key thing for the economy. >> -- 2% by the end of the year, right? >> the thing is -- >> is that -- >> you check the data. the data have been great. we've grown 1% for the first half of the year. i think we're getting way ahead of ourselves to take the unemployment rate when we know there's been a huge change in labor force participation. and interpret that as a sign that we're back to the go-go days. i think is an overreaction. i think quarter three quarter, four we're likely to come back in at the sort of modest growth rate that we had in the past. >> austin we've been at over 200k per month on payrolls for five months. >> i think part of that was the rebound from the weather in q2, and part of that is our productivity's been so slow, that it's translating directly

in to job increases, even though we haven't -- we have barely had growth. >> fair enough. >> you got to kind of koupt on that productivity growth being very low for a long time. >> to be fair. that's fair. but i mean what matters for fed policy is what's happening with the slack in the labor market. so, you know, if, in fact, underlined productivity growth is slow and slowing that means we are going to get jobs, the job market is going to tighten more quickly. we're going to get more wage growth and inflationary pressures. >> if we get the wage pressures. >> let's break up the twins here and see if we can get tony fratto going. >> thanks, steve. >> give us your take. between tony and -- between austan and mark. are the numbers really that good or overstating it? >> i think they're better. i think they're directionally better. we get caught up talking about the rates of improvement versus levels and we still have a lot -- some ways to go on levels but the argument that we've been having for really a couple years

now is, labor force participation and the rate is, you know, is this structural or cyclical. and we're going to test, you know, the theories on that. i'm more in the camp that it's more -- we've created some structural restraint in the availability of, you know, workers here. and so we're going to test wage price a little bit sooner than we expected. others in the camp that it's more cyclical, and there's more slack there. and so we have a little bit longer of a run time. so, you know, we're going to test that see -- we should see it in the evidence of wages over the next, you know, four to six months. and that will tell us a lot. but we're bullish on where employment is going to be this month, and in this period. i think we've stepped it up to, you know, from growth with a real lack of conviction, we went through a long period of growth, with a lack of conviction, and i think we're stepping in to a period of growth with a lot more conviction and that's going to result in greater employment. >> is good good or is good bad? >> well i think good is bad in

the sense that, the fed is -- needs to reduce their accommodation. zero interest rates is wholly inappropriate to the economic environment we're in. qe was a trillion dollar annualized program in 2013. it is going to zero. that is a form of tightening in my opinion. then the balance sheet is going to start to shrink. they've medicated us on this medicine, and it's going to reverse. so, that causes a revaluation of asset prices. because that's what the easy money has done. it's obviously lifted asset prices and we need a revaluation of that when that starts to go away. >> that's a huge debate in the market. we'll get the other side of that argument when we come back. an all-star cast when we come back. >> of course just minutes away from the july jobs report. here are the futures ahead of those numbers. we're going to have more market analysis when we return. let's turn back a little bit worse than it was before but better than the beginning of the

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welcome back to "squawk box." let's get more on this morning's market moves after a crazy day yesterday. the senior commodities trader at ii trader joins us now on the "squawk" news line. help us here a little bit, rich. your sense of what actually drove the decline yesterday and what it means for today. >> listen, i think you got to key on the rates as we see interest rates and yields on the ten-year move higher, i think that was the one-two punch, if you will. we know georisk is certainly out there as situations escalates and the situation with russia. but i think the rate issue is on everybody's mind. we came into the market short last night. we wanted to see some follow through with, you know, with the dax and we're seeing that down 2%. now, we have some technical damage in the marketplace, and i think this is overdue. you know, this market needs a correction. exchange of, you know, funds, and a pullback right now we're targeting about a 5% pullback

from the high which puts the s&p down into the mid 80s. so -- >> so rich if you're watching at home this morning and you're condemn dating calling your broker to say buy you're saying wait. >> i think it's going to get worse. we were on fast money yesterday, we noted that the vix was, you know, six month highs. basically with the vix as high as it was into the close yesterday, indicated another 1% to 2%. we're already seeing that. i think if we get a really stellar jobs number and this is going to sound bizarre, if we get a good jobs number the market continues lower because it's now good news is bad news and rates are going to have to come up and we know that we've got some statements out of plosser, i know he's a hawk but he's indicating the fed position is inappropriate. >> rich, thank you for this. i'm with you. i'm of the view that bad news is bad news and good news may be also bad news. thank you for joining us this morning. we will get that number, of course, in just about 12 minutes. steve? >> up next final predictions on

the jobs market. make sure you play along at home. who are you putting your money on to be the closest to the jobs data, mark zandi, tony fratto, austan goolsbee or peter book bar. come guys, small. >> so serious. >> the right call by voting in our realtime poll. cnbc.com/vote. and get -- >> this is taped. >> oh, it's taped. >> it's a real vote. it's a real vote but that's not them. >> i thought that was them. >> see -- >> "squawk box" will be right back.

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welcome back, everybody. we're just a few minutes away from july's jobs numbers. turning back to our panel right now we want to get their predictions. our guest host mark zandi, moody's analytics chief economist. peter boockvar, chief analyst at the lindsay group. tony fratto, and austan goolsbee who is a professor at chicago's booth school of business. guys, let's go through this and get your predictions from each of you. peter i think you're at the low end. >> 205. i think just giveback from the prior month's strength. but still 200,000 will be good, not great gut good enough to get the fed to back off from what they're doing. >> all right. we've got you as the shark that's just starting to come out of the water. who should we go to next? mark what are you looking for

i'm looking for 210. i think the underlying trend is 225. >> you guys are a little bit below -- >> because tadp was a little bi soft. we're all focused on wages and wage growth yesterday the eci report so we should be focused on that. >> austan you're coming in at 232,000. why? >> well i think we're getting the slow productivity growth, and we've got a little of the bounceback from the weather starting to phase out. so i think around consensus but with the unemployment rate dropping just a bit. >> steve you're quite a bit higher at 270,000. >> i need to explain myself. i usually have the ism data before i do my call. those are two of my five components. i only had three of them. >> here's my guess but it may be lousy -- >> go ahead. >> we'll tell you the model has been spot on the last two months. right at 260. so i have to go with claims and adp and the prior, those are the big three of my five right there and the claims thing is off the

charts. >> yep. >> the claims at 296 average for the month, is telling me 300,000. i backed that off somewhat. the priors and obviously the adp is 218. >> claims, adp and -- >> and the prior three months. >> what's everybody's sense if any of these numbers come in what the market does as a function? >> before we -- let's get to tony, too. >> i apologize. >> you are the shark jumping out of the water with the very high end here. 320,000? >> yeah. and let me, if steve gets to qualify i'm going to qualify that making -- i never make predictions on jobs, and i don't because i don't like making predictions on numbers that get revised two or three times. but let me just say this we put a lot of emphasis on where claims are. i think the numbers that the claims numbers have just been too good for too long and plus i do think there's some really strong pent-up demand from the first quarter that's still has to work its way through, and has worked its way through in this -- in the previous --

>> andrew's got -- >> i also feel comfortable with it because that jobs plentiful number in the consumer confidence -- people have a really good view, i think, of what the job market is like. it's something they actually know about. what's the job market like in your industry and they say it's plentiful, i think that's real information. >> andrew had the great question. >> let's say any of these numbers come in? >> good news is bad news. >> if we're well above consensus -- >> good news is always good news. news is good. >> i'm talking about the stock market in terms of the immediate reaction today. >> i don't understand actually. markets need to price based on good information. they're going to get information, and whatever the number is, they're going to have to, you know, reprise where they think the future is. so i don't -- i never liked thinking of news as good or bad for the market but in terms of the market, equity markets, they're going to have to price based on what they think the future is. >> i guess my question is does the market look at stronger jobs number as good news because the economy is improving, or do they look at it as holy cow wait a

second this is going to force the fed to act more quickly than we anticipated. >> both. >> you think both? >> a lot of the hawks that are being the most vocal are themselves going to phase off the fomc next year. so i don't think we should necessarily conclude too much from what the hawks say. i think if you look at the sources of growth, and the rebound of gdp, you still have a way disproportionally strong auto sales number, which is probably not sustainable. it's just some bounceback. and you got very strong inventories number. so i think people should be a little mindful before just thinking hey, we totally turned the corner. >> well i think we have turned the corner. i think in the sense that we were in a 2% world, six months ago, nine months ago, we are now in a 3% world. and i think that's the message in the jobs data and it's pretty consistent. >> i hope you're right. i think that that's a little high. but i hope that's right. >> we should point out our poll has closed at this point but peter you have folks on your side in this poll coming. they're looking for numbers on the lower end.

45%. you came in at 205,000. our panel is going to be back for reaction to the jobs number. we do have some news that's just hitting from citigroup. the s.e.c. has concluded that investigation of mortgage securities practices without enforcement action. we'll have more when we come back. >> coming up the numbers, the july jobs report in just a moment as we head to a break. take a look at u.s. equity futures. it's all about latency. it's all about how fast does it run. i often sit with enterprises who ask me about how mission critical and how's the performance of the cloud. and i tell them, if you can make gamers happy, you can make anybody happy. speed is made with the ibm cloud. the ibm cloud is the cloud for business. here at fidelity, we give you the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price --

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welcome back, everybody. we are just a few seconds away from the employment report. we've been watching the futures. they have been under pressure. right now eamon javers from the labor department. >> 209,000 unemployment rate. ticked up to 6.2% average hourly earnings edged up by one cent to 24.45. private sector job growth at 198,000. now some of the revisions here. may employment revised up from 224,000 to 229,000. june, also revised up from 288,000, to 29,000. so total job gains in may and june were 15,000 higher than previously reported. the labor force participation rate also a little changed at 62.9%. the number of long-term unemployed was 3.2 million. the total number of unemployed

people changed little at 9.7 million. now for some of those key sectors. professional and business services added 47,000 jobs. manufacturing added 28,000 jobs. and retail trade employment rose by 27,000. this is the sixth straight month that job gains have been over 200,000. guys. with that nonfarm payroll number up 209,000 in july. back to you. >> eamon, thank you. that six month streak is the longest we've seen going back to 1997. if you take a look at what's been happening with the stock market, equities futures are responding positively to this news. it's above 200,000 but it's not hot news. that's probably goldilocks scenario in the middle of the markets. futures again paring their losses through some of this. the ten-year at 2.5%. down 35. below fair value is where the dow sits right now. when we looked earlier we were down by as much as 117 points below fair value coming off the big losses from yesterday. we'll continue to see more on this. let's bring our panel back and get more reaction to the data.

rick santelli is joining us from the cme. mark zandi, austan goolsbee, tony fratto and peter boockvar. let's get reaction from rick. what's been happening on the floor in reaction to these numbers, rick? >> not a whole lot. most people expected a weaker number. they're pretty conspiratorial down here. too hot isn't good. too cold isn't good. so it's right in the middle. so we could continue to propagate the federal reserve activities, many traders down here pointed to the steepening yield curve. so we see two-year notes backing off. we see stocks rallying and of course rallying from an unchanged mark with respect to the dow. >> steve, what did you see that jumps out at you in this report? >> so there's a lot of softness in this report that i think is kind of interesting here. obviously the increase in the unemployment rate. the muted increase in average hourly earnings. >> what was that? >> i see here earnings per hour went up all private nonfarm

workers. it's zero percent chance. now there's the one on the nonfarm production workers is up zero, too. that's the one you follow. >> that's consensus. >> household survey? >> that's what i wanted to talk about here. the workforce increasing by 229,000. employed up by only 130, and the unemployed up by 197 in part leading to part the increase in the u-6 by 0.1 percentage points to 12.2. and 27 weeks or longer going to 31 -- 3.1 million so that went up. those long-term unemployed went up as well. let me just take a look at hours here. so overall pretty good. overall pretty good. there's some -- there's nothing in here that says to me that the fed really has to accelerate all that fast because, the slack was not really taken up, and we get the slack from the household survey. >> by the way, we should give props to piotr. our viewers were right. >> didn't i say 210? >> no you're right. >> i thought it was --

>> we're playing by price is right rules. closest without going over. >> closest without going over. >> price is right. >> you never see price is right? >> no. >> the show. >> you go over you get kicked out. >> price is right? >> all right. >> i think zandi came in closest at 210. >> hours unchanged at 33.7. so that's not huge. >> good. >> in terms of not -- not a big -- what happens to gdp right now? >> well i think we're tracking around 3% for q3 gdp. 200,000 -- let's put this into context. anything over 200,000 in job growth, at that pace of job growth, even given normalized labor force growth the unemployment rate is going to come in, you know, 0.5%, 0.6% per annum. we're growing at a pace double the rate of normalized labor force growth. >> this gets back to the fed. the policy is way out of whack with reality to the data. the problem is the data is not great but it's good enough that they need to remove what they're

doing. >> depends on what you think how much slack is out there. >> if you think there's a 1.5%, 2% points in the labor force in slack which i think is the consensus view and you take my growth projection we're not back to full employment until late 2016 in. in that context -- >> what's your take here? does the fed need to move yesterday? >> no, definitely not. what mark said, i agree with. and i would just point out. this is a first job number that's coming after what was the q2 growth. which we know was strong. so that's why this month, next month, and the month after, what it's telling us about end of the year growth, i hope mark's right that growth gets up to 3% plus. but i'm afraid that it's not that. because if you take out the pent-up demand on autos, and you take out the inventories, we're back down to like 2.5 and 2.8 in which case the job market's improving, but it's improving

relatively slowly, so the fed's approach of slow phase-out is probably right. >> austan i thought i had you converted. what happened? where did you go? you were on my side. you were like growth is here. >> this is peter. >> data happened. >> do you really think the fed should wait another year. >> i think the fed should do what they're doing which is slowly phasing out. >> -- interest rates is appropriate in the u.s. economy right now? >> they're slowly tightening. if we're only growing 2.5% yeah they should not tighten sooner or they'll drive us into recession. >> -- behind the curve for five years of this recovery. they have lagged -- why would you cut off because you could potentially mute economic -- why would you cut off -- >> don't be made -- >> more economic -- >> that's his argument. >> let me say this there is going to be a major reaction to an interest rates normalized. whether it's next year, whether it's in 2017, 2018.

>> not -- >> i argue the sooner we do this the better. policy in my opinion, they're still printing money, even though it's going to zero they're still printing money and they have zero interest rates. we had 200,000 plus job gains for six months in a row. the unemployment rate has fallen from 7.9% to 6.2%. this is bad policy. they're repeatings mistake of the 2000s. keeping rights too low for too long and this will not end well. >> rick, i pretty much agree with peter. >> i don't disagree that the fed could get the timing and the scope and the measured pace on this right. but, if this is the trend -- if this is what we're looking at, i was expecting bigger numbers and a little bit more rapid recovery here. but if that's is what we're looking at the pace they're on is probably just about right to continue to unwind and do it in a measured way. >> if i told you the slack in the lake market -- if these are the facts that there's 1.5 to 2 percentage points of slack in the labor market, and the

inflation rate is below target, you know, it's up and down and all around but below target, what kind of monetary policy and we've come through the worst economic crisis in since the great depression, what kind of monetary policy would you be following? you'd be following -- >> i agree that the economy is only mediocre. i'm just saying that monetary policy doesn't match up even to mediocre. >> this is the druckenmiller test, the idea that you're much closer to normal on the economy than you are on policy. and i think, it's unfair i think to peter to say, just because you think it's should be a little bit higher doesn't mean you think it should be all the way higher. >> okay. >> just because you think you're off from where they should be doesn't mean they're way, way off from where they should be. i'm interested in how the market would set the rate right now, in the absence of qe for example. >> but this is working -- >> and i don't know that in this environment it would be a whole lot more. but i think you're right. it would be -- the real rate would be positive.

>> even if the real rate was -- >> was zero. >> the fed funds rate would be at 1.5% to 2%. >> this is -- so say two months ago we would have said the first rate hike is going to be in august of 2015. a month ago we would have said it's july 2015. with the data we're saying it's may 2015. the ten-year bond has dunham from 2 -- >> i think we're kidding ourselves. >> that's not the right script unfortunately. >> the first half of the script itself -- >> we're fighting the perception of what the script not what it should be or shouldn't be but what it is. >> if we're getting back to following the ten-year on this that's where we want to be. the ten-year is going to lead on this and will do that. >> you should be telling ten-years, right? >> the first half of the year's growth was only one percent if we had raised the rates six months ago i think we'd be talking about maybe we shouldn't have done that maybe we drove us in to mild recession first half of this year. >> guys, how much of this is out of our control though --

>> by raising rates -- >> how much of this is out of our control because when you look at us relative to where you see bonds in europe, and some of the other developed nations, some of this we can control some of this we can't. >> declags from europe, spanish ten-year yields being below u.s. >> earlier -- >> depressed because of all that's going on overseas. >> right, yeah. >> it may be part i think one reason why the ten-year is where it is is because the chinese right they were nervous about their growth rate so they were trying to lower the value of the yuan. >> has nothing to do with the sub normal growth at all. >> and by the way, we can get help on the inflation front from overseas. we've gotten it before. some people believe deflationary impulse is coming out of europe. we've seen for example some of the commodity baskets have come off quite a bit. for example what's happening with oil right now has been something that okay let's say you get first of all one other thing people -- don't make a mistake just because wages go up does not mean its inflationary. people talk about wage

inflation. the actual phrase should be wage induced inflation. wages can rise. and i can tell you that the fed chair believes wages can rise around 3% which is a full percentage point higher than they've been rising, and it not be inflationary. peter do you disagree with that? >> in an ideal world we want to see real wage growth. unfortunately i don't think that's what we're going to get. wages are going to follow the rate of inflation in my opinion and possibly further drive it. it's inflation that's going to move the needle on wages. >> but you live in a world where p&government got 1 million applications for 3,000 jobs. world wide but i'm guessing the ratios were not crazy here in the united states. >> we have the quickest pace of compensation in yesterday's eci since 2008. the trend is higher in wages -- >> and that was off a huge base of the first quarter. >> services inflation -- >> huge declags. >> services deflation ex -- after month after month after month. people want to call 2.5%

inflation not inflation i disagree. >> if we absorb the labor slack, if unemployment is 5.5% and we get people back in and people working part-time for economic reasons working full-time we're going to get real wage growth, right? history is pretty clear on that. and in fact we should get real wage growth because for the last five, six years, real wages have been zero, in context of rising productivity growth. so that doesn't make sense. >> i hope wages go up. >> and that's the -- that's the dynamic that's prevailed historically. >> i think what people have to understand is fully what the fed does. is that their policy doesn't create anything new. it doesn't create anything that wouldn't have happened on its own. all they do is pull forward. we pull forward economic growth. we pull forward the rise in asset prices. so for whatever reason this fed policy reverses, whether it's slow, or quick, there's going to mean adjustment in asset prices. >> what's the adjustment look like? >> i think -- >> give us the correction. >> with qe over, and looking back the last two previous times when qe ended, and now that

rates are actually going to go up, sooner than people think, this correction is going to be 15% to 20%. just as we saw -- >> 15% to 20% now? >> i thought it would be 15% to 20% beginning -- the beginning of the year. but, this is the beginning of the correction. and if this is the beginning of a tightening cycle that continues for years, this could be the end of the bull market. >> can i make a point? so monetary policy does pull forward economic activity, and did juice up -- >> and dramatically pulls forward asset prices. >> qe did work in that sense, right? so if you told me -- >> it only works on the upside. >> if you told me that qe juiced up stock prices by 10% to 15% above where they would have been otherwise i'm on board with that. what that means is -- >> argue a lot more than that. >> -- over time. >> doesn't have to come out all at once and it probably won't. >> how's how leveraged the financial system the markets are it potentially can happen quickly. a lot quicker than people think. when this kind of -- >> the qe driven market is not a

methodical direction. >> austan, what were you going to say? >> the fed's forecast, the cbo forecast, have rates going up something like 100 basis points a year for the next several years. i think if that's approximately the rate i think the market is fine with that. >> i want to talk about real people here. this is my count from yesterday before this number came out. these numbers, because the u-6 went up are worst today 9.5 million unemployed, 2 million people marginally attached. 7.3 million or 5 million people working part time for economic reasons. that's 19 million americans un or underemployed. now you tell me in that context, peter, and i know you're a good person, you want to tighten policy to keep these people from getting back to work. >> let's take the housing market. in the fed's infinite wisdom to help the housing market we've driven out the first-time home buyer. because we priced them out.

so if you own a home, you've been better off the last couple of years. but if you're a freshly minted household and you want to buy a house, the fed has priced you out. so let's argue that we need lower home prices in order to bring back the first time home buyer, which would actually help the housing market. it would cause more houses to be built. >> the price of the home is irrelevant if they don't have a job. >> what's the transmission mechanism between zero interest rates and a job? what is it? >> you would argue, it's cap-ex demand would be one. >> no cap-ex demand -- has been awful the last couple years. and when i went to college it was savings equals investment. not zero interest rate -- >> -- back to prerecession levels -- >> thanks to subprime loans. >> -- stock prices are up. >> i agree with you it's temporary and pulls it forward. >> tony let's get back to real people. what kind of pressure is the

fed -- he makes an excellent case for at least coming to a neutral funds rate. neutral real rate. what kind of pressure does the fed face from washington? >> pretty much the same pressure that they've dealt with for at least the last year, right? which is a real urge and a need for sharper growth that they're not seeing. but also that there's a lobby here for on the lookout for inflation. i'm not saying it's not backed by some, you know, sound judgment on what the future ought to look like. but we haven't seen it yet. you have richard fisher hon who has been the spokesman for this view for a long time. he has been saying for a long time that it's midnight. and maybe we are getting closer to midnight. but we're not really seeing it because of those numbers. those numbers are unemployed i still like to think about them as a share of you know who is actually looking for work. we really you know we have to think of the unemployment rate as real and how that affects the fed's thinking and wages and

that's really where this is going to come down to. until we see movement on those two numbers sharper movement the fed's that going to make -- not going to make any big moves. >> i look at the numbers, looks like the market feels like it dodged a bullet. >> yeah i think that's certainly the case. futures have been bouncing around an awful lot. if we take a look at the board one more time that shows you where futures are matching up against fair value you see that the nasdaq's turned positive. the dow futures at one point were down by more than 100 points below fair value from where they were. they're down only 13 points. s&p futures down by one. and again i think this was a case of not too hot, not too cold. i don't think the market wanted to see extremes in either direction and i think what you're watching right here is just kind of things settling out a bit. you have to remember we were coming off a very steep decline yesterday the dow was down 317 points yesterday, s&p was off by 2% but this is not nearly as bad -- >> you've been concerned all morning about the follow-through. >> yeah. >> that was your number one thing. >> you don't see a bounceback. when you see the market down

over 300 points and down another 100 points the morning that's when you start to get concerned -- >> -- the jobs. >> maybe it won't be the jobs today as in it maybe the jobs issue whether everything that was on the table yesterday and i'm not sure yesterday's move -- >> certainly faster than -- >> what i will say is that this tells me that yesterday's move in the markets was related to the fed -- >> long positive guys -- >> fed was going to -- >> it's all part of -- >> nothing's changed geopolitically and you still see futures kind of turning around. >> the faster than expected acceleration by the fed eased off a little bit. >> yep. >> that's what these numbers mean to the markets i think at this point. >> i want to thank our panel today. gentlemen, thank you all for joining us. >> what a great panel. a major legal question answered at citi. that story and other headlines. we'll talk more about the jobs report when we return. please come back. no question about that. but your erectile dysfunction - that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready.

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welcome back to "squawk box" this morning. the futures right now after the jobs report, you're seeing things now the dow looks like it would open off about 12 points. it's been a bit of a seesaw. we saw it down as much as 117 points earlier this morning. that reverse literally in the last half hour as we got numbers we'll put in the category of sort of expected? >> 209,000, estimate was for a little bit higher. you saw whisper numbers well above that. >> the thing that really calmed

the market was the average hourly earnings and -- >> three bips on the ten-year. >> the market was able to say we now have six months in a row of plus-200,000 job growth, the longest stretch we've seen since 1997. a weaker-than-expected number but better by historical standards. >> and the fed says, this is exactly the forecast we want to get to the mrapath of normalizan we put in place. >> i think the market is going to be focused not on the number of people coming into the workforce but the amount of slack that's out there. this told us, there's a lot of it. >> the key is the wage growth. yesterday we got that very important employment cost index. that's the most comprehensive, consistent measure of wages and compensation. it was on the high side.

but if you extract and look in over the year, it's still 2%. >> when we come back, we have earnings from chevron and a deal in the gaming sector. in a worlg faster than ever, we believe outshining the competition tomorrow requires challenging your siness 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.

welcome back to "squawk box," everybody. the futures again improving drastically after we got that jobs number. report of 209,000 jobs added for the month. that was below expectations but still above 200,000. seemed like the market liked that just fine. check out shares of chevron. the oil giant reporting earnings of $2.98 a share. two cents better than expected. also shares of bally technologies is soaring. it's a big premium. the stock is almost all the way up to that level. we'll look at that a little later today. scientific games, that stock up as well. coming up, mark zandi wraps things up on this interesting jobs report day.

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newlywed discount. new college graduate and retiree discounts. you could even get a discount when you add a car. call liberty mutual for a free quote today at see car insurance in a whole new light. liberty mutual insurance. welcome back to "squawk box." 209,000 jobs. now at 6.2%. final thought, mark zandi? >> perfect report. something for everybody. markets like it. economists like it. fed likes. it was perfect. >> and the stock market will like it by the time the day

ends? >> a lot between now and the end of the day. but i think the market liked it. and by the way, i was 1,000 off. even with this price -- >> you're right! >> thank you, steve, for being here. make sure you join us on monday. "squawk on the street" begins right now. right now, good morning. welcome to "squawk on the street." i'm david faber. jim and carl have a well-earned day off. let's give you a look at futures after yesterday's drubbing on the broader averages. the s&p is looking down ever so slightly. and let's also take a look at the ten-year note yield. perhaps it was the prospect of higher rates yesterday coupled with a lot of concerns that brought us down 2% on the s&p. down ever so slightly in terms of the ten-year.