singing "my way" in dedication to carol loomis. >> who just retired from "fortune." a fantastic journalist. >> one of the greats. >> walter, thank you for being here with us today. appreciate it. congratulations on the new book. >> thank you very much. >> that does it for us today. right now it's time for "squawk on the street." ♪ turn it up ♪ scream it loud >> good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber. a number of profit warnings today. container store, samsung, soda stream. first some breaking news from the imf. sarah has details on that. >> international monetary fund lowering its outlook for world economic growth. it now predicts that the world economy will grow 3.3% this year. that is down from 3.4% in july.

sharply lower than what had been expected in april. also lowering its growth forecast for 2015. the main reason, according to the international monetary fund, geopolitical risks. they cite risks coming out of the middle east and coming out of the tensions between russia and ukraine. on the up side, the imf revised the u.s. outlook higher. growth for the united states set to be 3.5% for the second half of 2014. 3.8% in 2015, but the u.s. is certainly a bright spot in what is otherwise a down beat picture. europe, japan and the emerging markets all taken lower. of the emerging markets, i thought it was interesting that brazil was actually cut in terms of the growth forecast the most. some quotes to highlight from the international monetary report, mediocre is the word. we heard this from lagarde last

week. it sets the tone between finance ministers. they'll be gathering in washington. they'll be there to discuss the new mediocre which is what the imf is calling it. flag warnings about the markets. equity markets and a disconnect that is developing between the economy and the markets. financial markets, quote, may be too complacent about the future, according to the imf. guys, remember when janet yellen was quoted saying in that federal reserve book, similar quote from the imf book which says, some valuations could be, quote, frothy. they don't elaborate where they saw froth or pockets of excess could be. we are going to talk to the chief economist of the international monetary fund in the 10:00 a.m. hour. you can be sure we are going to be asking him. overall, down beat forecast, upbeat on the united states, but lowering those growth forecasts. >> people in this country will go, hey, this is obviously the best place to invest.

>> on what is otherwise the global economy which is losing steam. we are globally interconnected, as we learned from the financial crisis. it's not out of the woods. yes, the u.s. is the growth engine. >> beware economists who make mixed stock market predictions. >> that's why i thought it was notable. >> they have an effect on greenspan's irrational exuberance, did it not? >> that was '96. briefly. then we continued a parabolic rise. >> going from 1.7, their prior forecast to 2.2 is not an insignificant move. that is not 0.1 point shaving here. >> it's driven by what we've seen from the gdp numbers going to the second half. coming off a flat half of the year.

helped by a better labor market. improving consumer confidence. slightly improving housing. overall they say that the federal reserve is on track to raise interest rates in the middle of next year which is consensus for what the street is expecting. and that quantitative easing is going to end in the fall of this year. >> let's get reaction to that. a general view where these markets are going. david katz joins us from matrix asset advisors. art hogan is also here. >> the imf is telling us we something know, globally the u.s. is stronger. we are seeing a slowdown in the euro zone. a lot propelled by the fact tensions in the russia/ukraine situation and sanctions caused a

slowdown. it also means we are going to have bifurcated monetary policy and a stronger dollar than the rest of the baskets. this is self-regulating though. when you think about that, the stronger dollar will help the euro zone. that will be stimulative even if they don't start quantitative easing sooner or later. >> david, you are adamant this market is cheaper than it was in 2000/2007. >> you hear people talk about the market at highs. earnings are 130% higher. pe has gone from 26 in 2000 to 16.5% today. the market is reasonably valued. underpinnings are okay. we think it should be a good equity environment. we will be buying into any significant sell-offs, any dips. >> let me come back to the story about the dollar. all the banks in this country suggesting that the first time in decades, the united states is losing the currency wars. clearly, the dollar is stronger.

we've seen the yen collapse. what happens if the euro collapses? deutsche bank is talking about us falling below parity by the end of 2017. goldman says we'll hit parity. 25% move sooner than later. that is a big move for a major currency pair. can this equity market sail along were that to happen? >> absolutely. you need that to happen. you need europe to become more competitive in a global marketplace so when we see that the euro/dollar get down to levels we've seen, there's plenty more room to go. we would offer up 116 by the end of '16 is a level to look at. makes them more competitive. increases ability to export. >> it will make the u.s. less competitive. it will take demand of jobs out of this country. if it's good for europe, it's bad for us. >> the sky is not always

falling. there is a reason our currency is stronger. our economy is stronger and we are becoming less stimulative because we can. this is a nation that consumes imports more than exports. we talk about the exporters being hurt. we also import. we'll import commodities that will be cheaper. we'll have a tail wind to the consumer. they pay less at the pump, less to heat their homes. things we manufacture will cost less to manufacture. it's not always negative. sometimes you have to look at this as a positive story. the strong dollar has that. >> i'm playing devil's advocate with you how you view the world. >> i'm going through some of these comments from the international monetary fund which are a good indication of where wall street is and where some of the global policy leaders are right now. there is a concern there is complacency in the markets. given china was market down economically down. brazil barely growing. the u.s. is better. we see that in the dollar.

can u.s. equities climb that wall of world worry? >> we love david faber's comment, beware of economists trying to pick the stock market. that's the first point that is valid. in terms of the u.s. stock market, as long as earnings are coming through, and earnings have been good this season, we think it can drive stock prices higher. you have a great deal of m&a activity, boards taking aggressive shareholder actions, dividends being raised. there are things negative out there. we think on the u.s. economic front things are okay. our economy is going to continue to muddle through it to actually do well. earnings are coming through good from current valuations that should allow the stock market to drift higher. >> what are you increasing your exposure to? what works best next in the market? >> two groups that have gone through a mini bear market or pullback have been industrials and energy stocks. we think the short-term outlook in terms of earnings is probably weak. if you have a six-month time

horizon we would be buying this group aggressively. johnson controls, eaton corp, general electric, te connectivity on the industrial side. we like energy across the board, devon, conoco, chevron, occidental are all poised to do better in light of the pullback in energy prices which have beaten up the stocks. >> you've often come on and talked about the banks. this morning, "the new york times," long story about continuing investigations of the banks. on terms of currency manipulation. there is this seeming never-ending series of scandals. does it change your opinion of that sector? no. banks have adapted and able to run their business through this. it is the cost of doing business, paying for these fines and paying for a much higher

compliance and legal expense. having said that, the banks are doing well on a business front. loans are picking up. credit quality is exceptionally good. if you get back to a normal interest rate environment, it should be helpful for banks. we like banks. they've done great over the last two years. we think they are poised for another leg higher. >> we'll leave it there. thank you for your time. david katz and art hogan. samsung estimating profits fell 60% in the third quarter. that's below expectations hurt by slowing smart phone sales and heightened competition from apple this. would mark the weakest quarterly profit in more than three years. margins down. these guys give pressure at the high end from the likes of apple and low end, though still the number one phone manufacturer in the world. >> stock price down 17% this year. >> the new lower margin phones they are about to come out with, will the volume be enough to

drive back sales? you talk about margins going down. if you look where we are with apple, the iphone 5 had a margin 49%. credit suisse reckons the iphone 6 has a margin 41% to 42%. apple is able to contain its margins. >> it is reflective how quickly things can change. we heard that a lot from executives lately. we noted it. talking about decisions being made in the enterprise by commercial customers. consumers, how quickly -- wasn't that long ago we were singing samsung's prizes. >> apple went with the bigger screen. china mobile has been ending phone subsidies which raises the cost of the samsung and apple at

the higher end. makes those at the lower end more appealing. >> lenovo, that's tough to compete with. >> we'll get to soda streamed and the container store. the man named top tech supply chain analyst by institutional investor, apple and hp in his coverage universe. >> latest on the ebola outbreak and race to develop a vaccine. my favorite stat of the day, the nasdaq year-to-date is up 6.66%. if that doesn't send a chill down your spine.

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a nurse in spain contracted ebola. meg terrell is outside the cdc in atlanta for us. good morning. >> reporter: good morning. there have been a lot of questions about what the u.s. intends to do to stop additional cases from entering the united

states. calling for flights from west africa to be blocked. they are saying they are looking at strengthening screening protocols from passengers leaving those west african countries and leaving the united states. >> we are working to do additional passenger screening at the source and here in the united states. all these make me confident here in the united states, at least, the chances of an outbreak, of an epidemic here are extraordinarily low. >> this as the first case of ebola was contracted outside west africa. that was confirmed yesterday in spain. a nurse treating a priest who died from ebola is confirmed to have come down with it. there are discussions about the nbc cameraman flown yesterday to nebraska for treatment. he is expected to potentially receive experimental drugs. we learned thomas eric duncan,

the only patient diagnosed on u.s. soil has been treated with the experimental anti-viral since saturday. he is in critical, but stable condition. just a week after he was admitted to the hospital, they are tracing all his contracts, about 48 folks. nobody yet has shown symptoms. we spoke with glaxosmithkline, one of the leader developers for a vaccine for ebola. they are in phase one safety and efficacy testing now. they are ramping that up, could produce 10,000 courses by early next year to be deployed in west africa on an experimental basis. >> thanks for that. thomas duncan who is fighting for his life in dallas, the people he has come in contact with, still not systematic. we'll see what happens in the coming days. >> 21 days is the incubation

period. >> mcdonald's, the first annual shortfall in 11 years. hit by the food safety scandal and tough competition from convenience stores in japan. waiting to see whether or not camps come back in this country. jeffries has a note on restaurants. they take noodles up. they downgrade dunk-in. >> comps down 25% in october. yum! brands reports after the bell this. has been plaguing yum. they scrapped their guidance. >> this is because of the chicken scare. >> japan was also have trouble last year with competition locally. and with changing consumer tastes.

>> the scale of the task is huge. all the chicken from thailand, checking to see if they can get their chicken from brazil. the scale. keep the businesses functional. >> mcdonald's owns 50% of mcdonald's japan. worldwide sales for mcdonald's fell 3.7% last month. >> up next, wall street veteran art cashin on what we can expect from today's trading as we count you down to the opening bell. what if there was a credit card where the reward was that new car smell and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one. redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac - with no limits.

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just about eight minutes before the opening bell here this morning. let's talk to art cashin about what you might expect. ten-year below 2.39. what is that about? >> partly the imf downgrading the global economy. people are saying they are going to give janet yellen more room. we are just moving them down. question is how low will they go? we've got some projections down to 2.2%. see if that comes true. >> one big question is whether or not the august lows are still in play. something that would get us closer to 1905. have the bulls taken that off the table? >> not completely.

you've got to watch the russell. the russell was extraordinarily sensitive yesterday, both ways. in the morning rally, it didn't take out friday's high showing things were not too good. it led the way on the downside. then subsequently, it held in the afternoon and allowed for a bit of a bounce. i would watch 1090 on the russell. heaven forbid if we get real weakness. it takes out a year-long rectangular formation. >> what is the latest chatter into earnings season? is that going to be enough to take this market to new highs? are people expecting worse given what's going on abroad? >> i'm not seeing companies coming out changing things. on the back of this imf thing there will be questions. it's the season where retailers talk about how great christmas is going to be. then they revise it.

>> 4.1%. >> last year they did 3.9% and it came in 3.1%. >> we are getting warnings from the container store. should we look for a stronger dollar? >> i think it's going to cause the cfos to work extra hard to live up to those earnings reports. the s&p, as we said to boredom here, gets more than half its earnings from offshore. could be a tough game. >> we have a new expression from deutsche bank, euro glut? >> no. >> they are running such big current account services in europe, they are generating $400 billion of excess capital. it's going to be worse than china was in the 2000s. all that capital has got to go somewhere. the argument goes a lot of it

will come here. it will push the dollar higher. it could crash the euro. what do you think? >> i think that's a possibility. i think the germans wouldn't be too upset with that. their exports have been going down recently. they are rooting for a weakened euro. >> if this crashes to parity -- >> by 2017. >> can this market continue on? will the equity market here be unaffected by that move in broad terms? >> i personally don't think so. i think it will come home to roost. a lot of people will make the remark or the attitude that you just suggested that with the stronger dollar, it tends to return here. it's the only place to invest. i don't think that virtuous circle can continue much longer. >> i'm glad we got back to technical levels today. >> okay. good. >> art cashin. opening bell about 4 1/2 minutes away.

you are watching cnbc "squawk on the street." opening bell in 90 seconds. a lot to get to today. a lot of analyst moves and profit warnings. first up, former treasury

secretary tim geithner arriving at washington, d.c.'s u.s. court of federal claims for his testimony and former aig hank greenberg's lawsuit against the federal government. geithner's predecessor hank paulson took the stand yesterday. talked about the aig bailout. all at emotional baggage. >> getting dressed while he is walking. >> doesn't look happy to be there. this is obviously a painful experience. >> he looks less stressed than he did as secretary treasury. >> paulson wrapped things up quickly yesterday. >> there are six to seven hours planned. ben bernanke will take the stand. hours for him, expect a defense of the government bailout of aig, a strong one. >> we'll talk about the container store. revenue guidance for the full year is not good at all. especially going onto a quarter where they make 70% of their

profit. we'll talk more about that and the container store. first up we'll get to the opening bell here at the s&p at the top of your screen. down here at the big board, and the nasdaq xcerra. soda stream, we have not succeeded in attracting new customers and must alter their course pivoting to a health and wellness business model. we know all the trouble soda is having in this country. >> soda stream had been bucking the trend with its do-it-yourself, make it yourself soda. this was a warning. the ceo said we do have to

change course. >> they missed last quarter. warning this quarter. a lot has to do with the united states. it's the relationship with the retailers, as well. relationship with those that would sell the machines and discount the machines. not really grabbing this health and fitness trend which they see is key. in an environment where goldman initiated a buy today. >> $166 price target. goldman is optimistic on keurig's cola partnership. they are developing a machine to make carbonated drinks. goldman says that could be four to five times larger. >> 25% upside is the call here. >> price target $166. gmcr is your top gainer on the s&p. they talked about the cusp of a multi-layered product growth cycle. >> when you look at the consumer

staples industry in general, it's hard to pinpoint a disrupter, an innovator. monster energy is one. they called it a disruption story on single-serve coffee. >> soda and gmcr heavily shorted. not as heavily shorted as gt advanced technologies. filed for chapter 11. was down 90% yesterday. today up about 20%. if you are an average supplier, you take on a lot of credit to meet their demands. if a contract doesn't come through like it didn't in iphone 6, you've got troubles. >> typically you see slow and steady until the end.

people not seeing the signs, perhaps, they are running up against a financial wall. >> how about apple? >> people wanting to know why apple would go straight to market 11. are credit conditions getting tighter? very curious yesterday. >> or was there so much expectation there would be in the new iphone models. there were only in a few of the apple watches, the stock came crashing down. >> take a look at adco today. farmers are not going to have the same amount of money to buy new tractors.

currency effects, cutting production schedules, cutting expenses, we know about all the problems at deere. that is going to be a new low for the year, at least down almost 6%. >> i remember speaking not too long ago to the deere ceo about this. when they would come back. he wasn't willing to call a bottom yet. they are still planning to sort of right size production as we are seeing with adco to meet the demand of farmers' orders which are slower. >> we mentioned dunk-in below the bell. they cut dunk-in calling about fewer catalysts. noodles is the more interesting story. talking about improved visibility. they take their target from 22 to 24. having retraced its ipo price now. i don't know if you remember some of the issues with noodles

after they went public. these food companies came public. ran into trouble on the share price. jeffries getting more constructive on the latter there. >> container store. this time last year it ipoed at $18 a share. doubled on the first day. clearly in some difficulty as they come through with comments fairly down beat comments about the future. still intending to increase their footprint, open more stores moving forward and suggesting the solution to the system is the closet operation where you go in and get storage space specifically designed for you. they think that could take the average spend from $60 to close to $2,000. although the ceo is down beat as they go into the most critical of their quarters, i think he was saying 70% of revenue comes in the fourth quarter. they still have high expectations as to where they

can take their business. >> overall, marks not looking good. dow down 127. we have not a single dow in the green. financials will be where the pain is felt in the early going. jpmorgan, goldman sachs, american express among the biggest dow losers at the moment. >> we haven't really discussed again. i mentioned it in a question at the top of the show. latest story, "the new york times" is the lead in this story. indicating that the government may be preparing new rounds of charges. this time related to currency manipulation among the bigger banks. we'll see how it shakes out. that's got to be impacting some people's view of the sector. yet another potential round here where you've got litigation, although it typically doesn't go to litigation. it does usually end with significant settlements. >> haven't they been expecting this? >> libor is working through

europe. >> i know the banks have been warning. it's been on the radar. they've been firing a lot of the head of trading. it's more of a story in london, which is the center of foreign exchange trading and also in tokyo. clearly, i guess, that is gaining some traction and it may come to a head. >> s&p 1950. this will be the sixth consecutive day the s&p is below the 50-day moving average. bob pisani on the floor. >> dow down. some weakness in travel stocks, put up some travel stocks. want to show you carnival, the cruise lines are to the down side. some of the airlines are down, as well. some concerns about ebola. we have retail stocks down here. there is general concern about consumer growth. macy's, kohls, best buy. consumer discretionary appears to be the weakest sector.

we haven't had help from europe. german industrial output down 4%. that's the biggest decline in four years for them. germany is notably underperformed the united states. german stock market, there is the dax. down about 4% this year. s&p 500 up 6%. the real down turn has come as what we have is justified concerns about slower growth. for their trading partners. the rest of the european union, russia, as well as china. you have three trading partners, major exporting company with general slowness concerns weighing on the stocks. german stock market in general weak. in the united states, sap trades here. deutsche bank. commerzbank trades in germany. all down 2% or 3%. the markets are losing confidence in what the ecb has to offer. the ability of european officials to enact structural changes. it's been very slow, particularly in the southern country.

dealing with deflation issues all around. lower global pros, lower commodity prices. i watch etfs. look at tips. treasury inflation protected securities. people are worried about inflation. they buy this. if not, you see what's going on. this has been down. there's been very heavy outflows from this particular etf for the last several weeks. really for a month. you can see demand has been declining for that. if you look at the growth areas. we've been talking about the russell 2000. if you look at the russell growth component. there it is on the white line there versus the s&p 500. the last month the russell growth component has been noticeably underperforming the rest of the overall market. there is your slow growth concerns weighing on things. s&p, no place to put money. stocks up, bonds up. we are up 6% on the year for the

s&p. new ipo on etfs here. international ipo. the renaissance one. it tracks the global ipo market. they don't trade here. we had a couple recently. the chinese, the largest car rental company in china went public in china. you can't get it here in the united states. jimmy choo going public. these you can't buy in the united states. that's why you get these etfs here trying to get onto that international market. back to you. >> thank you. with the dow down 136 points, let's check in with morgan brennan at the nasdaq. >> you can see it's a sea of red on the wall behind me at the nasdaq. we are down about 0.7%. 32 points to 4422 for the nasdaq. soda stream leading the losses. leading the composite lower.

those shares are down about 20% after the soda machine maker warned of a revenue shortfall for its third quarter. that is due to slumping demand in the u.s. another name that's trading lower is amazon. that's down about 1% right now due to the reports that it will face an eu investigation over a tax deal it struck with luxembourg. keurig green mountain, we are seeing that trade about 2% higher this morning. also drug maker ch ifchimerix. we've been seeing a larger sell-off in the biotech stocks. down again another 1.5% today. all names we are keeping an eye

on. >> thanks very much, morgan. as equities sell-off, treasures and the japanese yen are in demand. let's head to the bond pit in chicago. >> you nailed it. between the growth issues that arise based on the imf's assumption of global growth, pmis in europe, we continue to see pressure around growth. that shows up in buying around treasuries and other sovereigns. look at a two-day of 5s. we have a parallel shift on the yield curve. 5, 10, 30 each down three basis points. open the 10s up to the third week in august. if we want to get a very specific look at europe, let's start out looking at their boon. two-day chafrt, 90 basis points is the close yield. the dax says it all. watch the dax.

it has been consistent. look at it since august 1st. keeps moving lower. if we look at foreign exchange on a day where everybody is talking about how bullish they are for the dollar, everything is changing. look at a two-day dollar/yen. 1.10 to 1.08. reject that level big time. euro versus the dollar, euro is heading up. while everybody is all friendly about the dollar index, that is in the rear view mirror. it had a great run and will consolidate. it has lost momentum. need to pay attention here to see what is priced in and how big the trade is. back to you. >> thank you very much. when we come back, goldman's chief u.s. equity strategist david kostin will give advice for navigating an increasingly volatile market. former shell president john hoffmeister how low it could go at the pump.

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not a good day. dow is down 153. imf cutting its global forecast for the globe. they are increasing it for the u.s. how long can the u.s. stay afloat in a slowing global environment? >> something we'll talk about chief economists at the imf the next hour. let's check on energy prices. crude oil and brent under pressure. let's go out to bertha coombs at the nymex for more. >> commodities investors have done the same thing as the imf. we are seeing nymex retreat once again. it seems to be holding the $88 mark. that is sort of a real level of support. 18-month low there that seems to be holding for now. what we are watching is brent crude. as the imf noted the international market, europe, is very weak. we get weak numbers from germany. more pressure on brent. especially because opec has yet to indicate it is going to make any sort of intermediate cut to

its production ahead of its meeting at the end of november. as a result, we are watching $90. that's the price where a lot of folks think we are moving on brent. brent today hitting a 2 1/2 year low nearly. we watched that brent premium over crude. look at this chart year-to-date. it has collapsed. down about 90%. we could see that get to par. as far as metals, the weaker dollar given an uplift. copper lower with all the concerns about demand and weakness everywhere outside the u.s. back to you. >> thank you, bertha coombs. that fluctuating crude oil price now close to their lowest levels of 2014. regular unleaded averaging $3.27 a gallon. prices expected to head lower. joining us former shell president john hofmeister. great to have you back.

>> good morning, carl. >> 10% of gas stations have a sub$3 price. how large is that number going to get? >> i think it will grow significantly over the next one to two months. i think it will be a nice respite from the pressure we've been under on the high price side. i look forward to it, frankly. it will help local economies. people will have more disposable income. it's not going to last, unfortunately. because we still have no plan for the future. we are currently going through the doldrums in the global economy. the brick countries, europe, china slowing down a bit. the underlying increase in production in the u.s. helps, of course, in this country. we should see opec probably jumping in as the price moves below $85. >> so $85 is their tolerance for pain. once we hit that, they have tightened the signature? >> i'm sure some members of opec are already screaming for saudi arabia to cut back production.

not that they want to cut back production, but countries like venezuela, iran, iraq, others, they desperately need prices near triple digits. >> how much of what we are witnessing -- good morning, john -- how much of what we are witnessing do you think is due to the fact a lot of major banks have had to curtail their commodities trading operation? do you feel as a former president of shell those banks were able to artificially inflate the price of oil, in particular, and now they existed that is one reason why we are where we are? >> that's part of it. it is weak demand overall. yes, there is a deleveraging taking place. that is why i said for the next month or two. once that deleveraging is exhausted and the banks are out of it, then we are back to more of a business as usual. those stocks will have been absorbed into the marketplace and consumed. i think come january, february,

we'll see the normal price rise we've seen before. having had months of low prices, we could see a little bit of economic strength actually affecting the market to the up side. people should not get comfortable with sub $3. it's not going to stay. >> i've seen some statistics in terms of commercial gasoline traders. their lowest net short position since 2010. what could make a trader stay short? >> continued decline in the global economy. let's see what happens in china. brazil, russia, india and china are struggling. they are needed some kind of impetus from somewhere i'm more confident that the u.s. will actually present long-term supply increase but also demand increase as the economy strengthens.

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and yet another energy saving opportunity from pg&e. find new ways to save energy and money with pg&e's business energy check-up. markets not getting a good start to the day. >> the first time since the end of the home buyer tax credit in 2011, the numbers could be lining up for a triple dip in home prices. diane's olick joins us from washington. >> good morning, simon. we've got a brand spanking new report out with the latest read on home prices. these prices are for august, up 6.4% from a year ago. that does include sales of distressed properties. last year this time we were up

twice that much. folks claim the limited supply of homes for sale will keep prices in the positive year over year. analysts at clear capital say prices could go negative nationally by the end of this year or the start of next year. that is the triple dip. >> if prices go down at the end of the year, if not the first quarter next year, what you'll see is the first quarterly decline since 2011. what that means is that will be the first time collectively as a nation we've seen prices drop since the low point or trough of the housing crisis. >> they use the west as the canary in the coal mine. price gains coming down sharply because so, too, are distressed sales. they say that drop in the west will be enough to freak out the rest of the country or better yet impact consumer sentiment enough to create that third dip. analysts at credit suisse say first-time home buyer costs are

approaching recent peaks because of higher rates, higher prices and mortgage insurance. they lower estimates for housing starts for 2015 and 2016. lots more detail on this online realtycheck.cnbc.com. when we return, goldman's chief u.s. equity strategist david kostin on what investors should do. olivier blanchard on his group's economic outlook for the u.s. and the world. a more enjoyable o get your fiber. try phillips fiber good gummies. they're delicious and an excellent source of fiber to help support regularity. mmmm. these are good! the tasty side of fiber. from phillips tdd# 1-800-345-2550 even on the go. tdd# 1-800-345-2550 open a schwab account, and you could earn tdd# 1-800-345-2550 300 commission-free online trades. tdd# 1-800-345-2550 so if you get a trade idea, schwab can help you take it on. tdd# 1-800-345-2550 we're getting a lot of questions tdd# 1-800-345-2550 about organic food stocks. tdd# 1-800-345-2550 [ male announcer ] sharpen your instincts

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welcome back to "squawk on the street." the imf tripling its forecast for global economic growth this year and next. the chief economist will join us live in a few minutes. >> and we'll talk to goldman chief u.s. equity strategist david kostin where the markets are headed. >> earnings season is upon us. we'll tell you which stocks and industries should be on your radar. >> imf cutting its global forecast. markets not having a good start to this session.

dow down 129. got earning season about to kick-off state side. should we avoid companies with large international exposure? joining us david kostin, chief u.s. equity strategist with goldman sachs. good to have you back. >> nice to see you. >> everything is pointing to you want to stay close to home. >> that is correct. that relates to relative economic growth rates and represents a stronger dollar environment that we expect to persist several years. goldman sachs feel we have the euro going to parity versus u.s. dollar by 2017. over the next 12 months, looking at 5% depression. >> that is a huge move. that is a 25% move. for a currency, it's over several years, that is a big one. >> the environment of the u.s. economy is improving. one of the key variables you are

seeing u.s. companies re-invest in the business. capital spending up 9% this year. that is an important development from a sustainability of the u.s. economic growth. goldman sachs around 3% growth. europe looking at barely 1% gdp growth. this is where as a portfolio manager you want to own stocks selling domestically. >> i don't understand why the russell isn't doing better. those are medium cap companies exposed and in correction territory. >> correct. it's juxtaposing with a stronger u.s. economy would suggest tightening financial conditions next year. that would be a more difficult environment for smaller cap stocks with less robust balance sheets. >> two trends an investor has to take into consideration. one is a stronger u.s. economy

which is good for domestic facing stocks, but also an environment where you have tightening financial conditions index. you want to own stronger companies. weak stocks outperformed by 50% points. you want to focus on dome yik stocks. >> what is the call on the ten-year by the end of the year. are interest rates going higher in this country? >> federal funds rate will likely be unchanged. the ten-year yield looking at the end of this year 2014 around 3%. next year perhaps around 3.5%. >> the economy reflecting a u.s. economy growing. >> that is a huge move in interest rates. >> do we start screening companies with all the revenues in the u.s.?

>> you look at a variety of companies focused in any industry. paychex discover financial services. again, stronger balance sheets. that is the area of the market we would choose to focus on. from a broad view, you can look at more cyclicality. >> are we back to a decoupling argt umt? >> 65%. u.s. economy to focus how the consumer is doing. that's the tail wind. >> with your view on rates and the economy, that would be an argument to own financials. they've been waiting for this higher yield curve and interest rates. >> we prefer to focus on more

cyclicality. >> is this stronger dollar dynamic going to show itself in this quarter's earnings? do we need to get out of those names prior? >> i think the story is the latter part of the third quarter. it's a fourth quarter event. it's important to remember as an investor that most of the impact on the driver of sales and margins is going to be u.s. gdp growth. the dollar is a modest driver of sales and margins. >> we have bulls arguing 40% managers are underperforming benchmarks. >> yes. momentum is likely to be beneficial. >> do you have a year-end target? >> year end around 20, 50. roughly 8% or so rise in market. >> is it possible for profit

margins to go higher in margin? stayed steady the past four years. >> but at the high. >> just under 9%. >> it's great to talk to you. >> we have data crossing on employment which will be of particular evidence of the fed. >> an august number wbetter tha expected. 4.35 million. last number was revised down from 4.673 to 4.605. we are up 230,000. if you look at quits, the best levels since 2008 which implies confidence to switch jobs. if we look at separations, they are unchanged from the last look of 4.4 million.

>> the obama administration reportedly ready to ramp up streaming of travelers after news a nurse in spain is the first person to extract the virus outside of africa. meg, good morning once again. >> reporter: good morning. there have been questions about experimental drugs in the ebola situation. as we learn that thomas eric duncan, the patient treated in dallas was treated over the weekend with an experimental anti-viral made by a drug maker called chimerix. other payings treated at a nebraska medical centers with treated with an experimental drug. the nbc news cameraman flown in yesterday from liberia, questions whether he will receive experimental drugs. there is z-map that is out of supply right now. we talked with cdc director dr.

tom friedman. he emphasized vaccines are part of this. they are looking at patients here and the united states -- sorry, volunteers in the united states and europe and moving into west africa. he emphasized manufacturing can take time. >> it takes years to go to a few million doses. we are going to come press that timeline. we will not have large amounts of this vaccine available 12, 18 months from now. >> other drug makers working in vaccines include johnson johnson and new link genetics. right now they are all in testing, as well as the drugs. back to you. >> thank you very much. >> judges the imf's chief economist joins us live on cnbc.

before the break, another check on the markets, the dow down triple digits. having recovered. go ahead and put your bag right here. have a nice flight! traveling can feel like one big mystery. you're never quite sure what is coming your way. but when you've got an entire company who knows that the most on-time flights are nothing

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welcome back to "squawk on the street." agco cut revenue outlook. that stock down by nearly 7% on the trade. other farm equipment makers are down on the news. check out deere. cnh industrial all moving lower here. >> on a broader day for wall street. dow down 100 points. hurting the mood. international monetary fund out with its latest world economic outlook report cutting global growth forecast for this year and next. joining us first here on cnbc imf chief economist olivier blanchard. good to see you again. >> good to be here. >> i read your report. it's depressing. you use the word mediocre to describe global growth. explain why you're so gloomy.

>> our revisions are small. they are 0.1% this year. our forecast is 3.3%. it's 3.8%, revision of only 0.2%. revisions are small. it's a very uneven recovery. >> you seem to be concerned that financial markets may be xoo complacent about some of the future risks. are you surprised to see the reaction to this report as a global equity sell-off? do you think equity markets are underpricing what is happening in the global economy? >> there are some markets which i think are too optimistic.

we'll see some exit. it has been explained by the fed. it will still come with some bumps. we'll see where the market is a bit worried. we'll get numbers like these ones which are going to get people to think the future is not quite as bright as they thought. >> you use the word frothy valuations. where do you see that across markets? to markets, sovereign bonds in europe is too optimistic. it's i not all over the place. it's not a time to worry very much. it won't do anything to interest rates because of financial risks. it's something to monitor and be ready to do something if it became worse. i think the word frothy is right. >> how close is europe to recession? >> it's not there. our baseline, which wouldn't be

changed much by the numbers which came out in the last few days, is for slow growth. the risk of deflation is there. the risk of recession is there. our baseline is for slow improvement. we have to be ready to do things if it materialized. >> mr. blanchard, do you think germany is being selfish running a trade surplus of 7% when its own economy is on its knees. do you think berlin is being selfish trying to stop the french and italians from investing more in their own economies? >> no. i don't think that's the way to think about it. what we argue with germany, it is in their own self-interest to do more to decrease the current surplus, which is too large and reflects too low a level of investment from the point view of if you're germany.

what we would like germany to do is increase investments. we made a purpose for infrastructure investment. it looks like it's the right thing to do in germany. this would decrease the current surplus in germany. they wouldn't be doing it for the others, but it would help the others. >> the u.s. growth forecast is clearly the bright spot. how resilient is this u.s. economic recovery to what's happening around the globe? >> we think it's resilient. it's not running, but may be walking on all four legs. we see the housing markets steadily improve. we are very optimistic about the fact the recovery will continue for some time. >> finally, are we in a currency war where nations around the globe in search of growth are resorting to devaluing their

currency for monetary policy to try to stimulate growth? >> no. i think the world is xlcomplete off. the worlds that are strong, federal policy tightened. i'm not surprised by what's happening to the dollar and euro. that is largely desirable. that is a reflection of the fact the u.s. is doing well and euro zone is not doing well. not currency wars. >> olivier blanchard, thank you for joining us. chief economist of the imf which downgraded its estimates for global growth this year. next, a preview for christine lagarde, my conversation with managing director of the ifm tomorrow in d.c. here on cnbc first 10:45 eastern time. thursday, excuse me. i want to update people on a potential huge mining deal that doesn't appear in the cards at this point.

had a phone call going for it. that having taken place earlier in the summer in july 2014 when glenn core made a call to rio tinto. huge miner on the globe with significant state held by chinese investors. that call was made in july 2004. according to a press release out by glencor investigating some form of merger between the two countries. rio tinto responded it was not interested in pursuing these discussions. glencor confirming it is no longer considering any merger trans yacks for the shares of rio tinto. earlier we heard from rio tinto

responding saying that in july 2014 that call had been made and conducted and that the board after consultation with its own financial and legal advisors concluded that a combination was not in the best interest of rio tinto shareholders. if they had decided to perhaps pursue talks, that might have resulted in the largest mining company out there. we'll keep an eye on it six months from now. they are frozen under uk takeover panel rules for six months in terms of doing anything. >> the approach they made to one of rio's major shareholders which is the state of china. trying to actually push the needle here. rio tinto stock has gone nowhere for three years because of its exposure to iron ore. that is one area glencore is not supposed to. can they move the chinese to move the situation forward? >> correct. up next, shares of general motors slipping this morning.

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gm taking a hit out of morgan stanley. phil lebeau has this. >> i love the title of this note from morgan stanley. we are not waiting for gm to warn. he is saying general motors estimates for 2015 to 2017 are far too optimistic. he is cutting his estimates

between 9% and 24%. the reason why? he says general motors is facing the same macroissues that ford and other automakers are facing. ford a few weeks ago said they are bringing down their estimates, cutting guidance for future. the stock got hit after that happened. saying when it comes to latin america, russia, foreign exchange, when it comes to consolidating platforms the next several years, general motors is in the same boat as ford. if ford is warning, shouldn't general motors be doing the same thing. cutting price target from $29 to $27. the lead paragraph says, by our calculations, gm's exposure to each of these factors is as great as ford. therefore, we are going to warn for general motors. morgan stanley cutting its estimates between 9% and 25% over the next three years for gm. that's why the stock is under pressure today. back to you. >> thanks very much. more caution on some of those

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q 3 earnings under way and

all sectors expected to post year over year growth. let's bring in christine short. she covers the corporate earnings space, senior vice president with estimize. we remember you from s&p capital iq. >> yes. >> you changed jobs. >> correct. >> therefore, what you are bringing to the table this time is different. it's a different way of trying to find out what the earnings will be. >> that's right. as you know traditionally, the wall street consensus consists of estimates from the sell side. what estimize are collecting predictions from the sell side, buy side as well as nonprofessionals, academics, et cetera. >> where is that taking you? what can you tell investors? >> well, looking forward to the third quarter, what we are seeing is a growth rate higher than the other shops. sell side is always conservative at this point in the earnings season. for the third quarter we are

looking for about 9% growth. on the revenue side we are looking for about 5%. this is going to be an interesting earnings season. last season we hit double digit earnings growth. that was the first time in three years. we hit 5% revenue growth. investors are looking to see if that earnings momentum is continuing into the balance of the year. what we can see, it is expected to do. >> who is really doing well? >> leaders right now, it's an interesting story. two biggest leaders on the earnings front, energy and materials are the two biggest laggards as far as revenues. no surprise if you look at energy and price of oil. we are looking at difficult comparisons year over year. in materials, the real laggards on the sales front are metals and mining. we'll get clues tomorrow with october reports and construction materials. we know within residential and nonresidential construction, a lot of volatility would explain that. >> what are you seeing in terms of financial earnings?

>> financial is going to be about mid way this quarter. we are looking at 4% both for sales as well as earnings. we are going to see how more of those financial settlements shake out third quarter. they had a hard quarter second quarter as well as first quarter. we are going to be looking to big banks. looking to see mortgage applications. there are still challenges out there for the big banks. >> how are we tracking on preannouncements? >> we have been looking good. companies for every two companies that have issues negative guidance, one issued positive. historically, that's about average. if you look at beginning of the year, we were coming into those quarters with 8-1, eight issues negative guidance and only one issuing positive.

>> what you're describing is a bottom-up approach to investing. what these multiples, what point the stocks will trade is the variable. where do you think the markets are going? what would you do as an investor based on the view you have? >> multiples are looking good. it depends on what sector you're looking at. the s&p 500, we are about 15, historically in line with what we've seen. markets aren't looking great. we could use positive earnings numbers to give that a boost. we'll see that over the next few weeks as more companies come out and they traditionally will beat those estimates. >> good to see you, christine short. >> we are getting breaking news on walmart. dominic chou is back. >> walmart, according to the associated press, walmart says it plans to eliminate health insurance coverage for a good portion of their part-time employees in the united states.

the move is going to mexico workers who work less than 30 hours a week, approximately 30,000 people. walmart does have about 1.4 million full and part time employees. a small portion with the overall population, but again, 30,000 employees that work an average of less than 30 hours a week will no longer receive health care benefits. walmart said they expect health care costs to be about $500 million the current fiscal year. they are saying for this group of employees, they will no longer have legal employment benefits or health insurance benefits. we have reached out to walmart for more comment. more details when they come back with comments. >> thanks. walmart isn't the only retailer making these moves. we've seen target and home depot. more people signing up than

expected in terms of their employees as a result of the rollout of the affordable health care. >> walmart is the largest private employer in the country. its health benefits as they are currently constructed for existing labor force, full-time are also something that certainly comes under the microscope over time given affordability or lack thereof. >> weren't we moving to a situation where they were putting doctors and dropping services into the stores? >> yes. >> on the consumer side. >> but saying it would cut costs. it was an intelligent way of having to move the discussion forward. >> walgreen and so many other drug stores are washing in on consumer-focused health care options with the rollout of obamacare. walmart has been raising premiums to deal with these costs. this will be an ongoing story.

>> and cutting wages. >> coming up, former new york fed president treasury secretary tim geithner taking the stand today and the aig bailout trial in washington, following former treasury secretary hank paulson. we have mary thompson live in d.c. with the latest 0 than that testimony. we saw tim geithner walking in. what is the status of his testimony? >> he's been on the stand just about an hour or so. it has been technical, very detailed. the plaintiffs' attorney walking through geithner a number of the credit facilities that the government set up for companies during the financial crisis, asking what the interest rates were on these facilities and what kind of collateral the companies that borrowed from them had to put up. geithner responding to many of these questions, i don't recall precisely. he is trying to get to the

request why they charged aig so much more when they lent aig money and why it required a big equity stake in the company as part of the collateral. geithner arrived earlier at 9:00 a.m. this morning. he didn't say a word to the camera crews waiting outside the court. former treasury secretary was the head of the federal reserve bank of new york during the financial crisis. now, his testimony is said to be much longer than his predecessor hank paulson who was here yesterday. he was on the stand just about two hours. star international, the investment form of hank greenberg is the lead plaintiff in this class action suit being tried here. the suit claims the government treated aig and shareholders unfairly during the financial crisis, charging high loan rates, higher loan rates than other troubled firms. when paulson testified yesterday, he said those high rates were necessary to prevent other firms asking for a handout and to persuade what was then a very reluctant congress and american public to buy into the

aig rescue. as we said, geithner has been on the stand for about an hour or so. we expect this to probably go all day then tomorrow morning we are going to hear testimony from federal reserve chairman ben bernanke. we'll be here with updates. back to you. >> we'll check back in with you, mary thompson. >> when we return, what main street thinks about the future of markets. most do not want to own stocks. tune in on thursday, as well. a first on cnbc interview with the managing director of the imf christine lagarde. dow down 80 points. when fixed income experts work with equity experts who work with regional experts that's when expertise happens. mfs. because there is no expertise without collaboration.

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what do americans think about the markets and future of the economy? the answer is revealed in the results of the cnbc all america economic survey. our senior economic supporter

steve liesman has details this morning. >> good morning, carl. this notion of an economy that is not quite enchanting americans continues. have had a little bit of movement, but really the levels compared to say before the financial crisis remain depressed. look at the data. survey 800 americans around the country conducted. you can see a tiny bump in those rating the economy excellent or good. that came at the expense of those who rate the economy fair/poor. these numbers should be five, ten points higher. how about the outlook for the future? we had a decline in optimism. those who say the economy will get better. increase of those who say the economy will stay the same. this notion of the eh economy continues. when we dig down deeper and what people think really matter for their financial well being, the outlook for home values, slight decline to those who think they

will increase the next 12 months. an increase in those who think home values will remain the same. the eh economy continues. take a look. the expected gain 1.7% down from around 2%. same story with wages. a decline in pessimism. not an increase in optimism. that's the whole story here. when it comes to stocks -- one more thing i want to show you. expected wage gain taking down 3%. look at stocks here. what you see is those who think it's a good time to invest for all, that's down. we've been down this before. we had a slight rise up near the 40%. now down near 31%. how about those, the 50,000 in

the market and those who earn more than $100,000. they came down. they are still above a critical 50% line. down from the peak of 2013. not a bad idea that we had a decline in the optimism over the outlook for stocks. sometimes, this works with the market and sometimes works against it. can be a counterindependeicator. back to you. >> we cut some of our losses on the dow. down 85 points. >> the overall market near session lows is bristol-meyers. news that the drug maker is withdrawing its u.s. marketing application for a drug combo to treat hepatitis c. they are down 2%. bmy to watch in today's trade.

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markets have cut their losses roughly in half. take a look at the industrials today. one of the worst performing sectors in the s&p. >> for right now, at least industrials, the worst-performing sector in the s&p. transportation among some of the big losers. if you look at delta or southwest. rail companies. cummins is the biggest decliner. interesting swath of different companies. overall industrials are ones to watch. they are the worst performers in

today's session. back to you. >> thanks, dom. let's get over to rick santelli. >> good morning. thanks, jim, for taking time to tuesday morning. let's hit this head-on. we have mid terms coming down the pike. we see the current power, the administration kind of bragging about the economy. put that off to the left. we see that the federal reserve still isn't ending zero rate policy even though they talk about it. out of those two, who do you think is more in tune with the economy? >> it is a low bar. i have to go with the fed. we have a paradox here. >> let me finish. if you believe it's the fed, then everything the administration is saying is not true because if it were true, what would the fed do? >> fed would be raising rates. >> i rest me case. >> if the economy is great they should be raising rates. if it's not as good as the administration said then

everybody should be talking about easy money for longer. >> another thing that gripes me. this is gripe tuesday. when i see these polls, president dropping, but the excuse is, congress is dropping more. when you have 535 people between the house and the senate, wouldn't you suspect their numbers should be more extreme because it's basically pairing one against 535. makes no sense. of course congress is going to be lower because of the times and numbers that are reflected by one statistic. >> you're right. congress numbers are lower because you are comparing a specific person to an abstraction. you can go back 40 years. you would be rare to find a time, if ever, that congress ever polled higher than what the president, whoever he is. >> another smart by i've interviewed of late, mr. feldstein. i asked him specifically if he thought slowness in europe and/or japan or china would alter the fed's course. he said absolutely not. i totally disagree with that.

your thoughts? >> i would respectfully disagree, mr. feldstein, too. i think the fed is very much attuned to the dollar. the dollar has been soaring. when you get to zero interest rates, relative size to balance sheets moves the dollar. the fed will start slowing growth. ecb japan will increase their growth to balance sheet. china may increase the growth because they are slowing, too. that gives the dollar strength. that makes our export business more difficult and a lot of fed officials have been talking about the dollar. remember when you asked the fed about the dollar, go talk to treasury? they are talking more about the dollar than they have. >> it amazes me how we see these twists and turns. here is how i want to finish off. do you think janet yellen is going to raise rates at all in 2015? whatever your answer, explain. >> i would venture a guess no. there are three issues, whether it creates inflation, which we

haven't had. whether it creates economic growth. we could debate whether the counterfactuals like bernanke likes to say. the third issue has the fed dominating, financial stability. they ended qe-1. the and the stock market fell 17% and they will they were compelled to come back with operation. and then qe 3. this is our third attempt to end qe. it is all about financial market. i don't think they want to upset financial markets. think i they are going to be really slow and wait for inflation. >> we are out of time. i'm sorry, i just think it is not the right course when everything is benchmarked at things like markets. but markets can throw hissy fit but when we are not giving ourselves time to simmer post to crisis. >> speaking of which, oil slides still this morning. brent near 27 month lows. more on crude.

>> we got numbers from the imf on projections for growth. we've just gotten them this morning from the energy information energy, the government's agency. eia is now projected lower demand for 2014 and 15 and higher production, particularly here in the u.s. lower price, lower the price of crude they see for 2014 and 2015. interesting number though, if you look at for 2014 they are forecasting u.s. production will be just over 8 and a half million barrels a day. that is slightly up. for 2015, they are lowering their production forecast from 9.53 million barrels a day to 9.5 million barrels a day based on lower output in the gulf of mexico. still that 2015 production represents the highest production level in the u.s.

since 1968. and that also means a lot more pressure for brent crude the international benchmark. because they are going to see a lot less imports here in the u.s. the agency is now projecting that in 2015, only 20 percent of our oil consumption will be from melting point imports. that is down about the third from last year. more production here in the u.s. increasingly putting pressure on the price of crude. and particularly brent. and we are watching brent. and anl analysts are say they expect opec move in to cut direction if we are seeing a the move. but so far nothing. >> let's check with john. >> it's a show you don't want to miss. venture capitalist tim draper

talking tact tech value vegass sky high and what it might mean for your money. the my space's co-founder to give us an update on social gaming and networking act i. scene 3.

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♪ ♪ i have made lots of million bucks but my grammar distinction ♪ ♪ and spelling sucks ♪ long story short ♪ berkshire's report ♪ i read it her way >> that of course a warren buffett belting out the tunes at the most powerful women event summit. singing "my way." >> is she still writing the buffett letter? i think she edited that for a

long time as well. >> a nice tribute. >> gracious. let's check the markets. down 94 on the down. a bigs focus on some of the companies that have come throw with earnings worngs today. >> slip stream, down 20%. coming without a warnings on sails. saying they are going to be much less than analysts predicted. they have to change the course. ceo has to draw out a new strategy and expect to hear more about that towards the end of the october. >> never got a deal. so often there was that rumor someone was going to come by and take a major statement. never materialized. >> in contrast to green

mountain. also working on a at home beverage system. >> a buy recommendation saying there is 25% upside. 5% of which you achieved at the open today believing that they are effectively best in class on many levels. not just the hot cup bus the cold cups as well. >> which could be 4 to 5% bigger market than actually hot. also in the food space watching mcdonald's as mcdonald's japan came out with very disappointing results. and this also comes right before set to get yum earnings. mcdonald's and yum have been hurt by the food safety scare in china with the food supplier. down 25% in the month of august, 16% in september. >> i guess you have to determine the underlying state of the business. we knew they had a problem with

chicken and mcdonald's japan is now routing from thailand and looking at brazil possible. so the ramifications are huge. at what point do they move past it? >> yum is saying something after the bell. so we'll watch that. with the dow down 110. carl over to you. >> midnight at samsung in seoul south carolina. 11:00 a.m. here on wall street. squawk alley is live.

good morning. welcome to squawk alley. a pretty interesting market day. markets took a spill at the open. down 150 on the dough. a lot of financials getting beaten up. we've claude back come but we're still getting triple digits. there are some outliers this morning. go pro at a new all time high. >> go pro has been able to best the tape like no other stock we've seen in the last several months. >> knocking on the door of 100 bucks. got a nice price target here go pro four