trillion, is currently 12% in japanese equities. expected to go to 20%. >> do you, in your own mind, have a list of your own lists? how many lists do you have? we don't have time to go through. we're done. thank you, david. >> thank you for having me. >> see you back here tomorrow. time for "squawk on the street." good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber. cramer is back tomorrow. premarket indicating a fairly modest attempt at recovering the 273 points on the dow lost yesterday. the worst day for stocks in two months. corporate earnings are trickling in. fed minutes on the way this afternoon as well.

a selloff in the markets. another 1% move to the downside. that's three in five sessions, actually. the fed minutes, as we said, coming this afternoon. >> yum cutting its forecast for the year. the scandal in china continues to weigh on sales. >> jcpenney is holding its investor meeting today. the stock has almost doubled since february. is jcp really back? >> more retail numbers today. costco earnings are out. they've beaten estimates on the top and bottom line. >> first up, stocks are looking to shake off global growth numbers. the dow suffering its worst day since late july. the s&p falling 1.5%, settling at the lowest level in almost two movanths. the worst day for transports in about eight months. oil today below $87. if cramer were here, he would say that is pointing to real demand concerns around the

globe. >> a sign, as you say, of just slowing growth around the world. that's the key. when you talk to people this morning as i did or even late yesterday, first thing they catch is oil. down today another 1%. >> the bond market is telling a similar story with the ten-year hitting 234. the lowest level since august. the 30-year bond yield hitting its lowest level since may 2012. so we're seeing sharp moves in the bond market. today the focus is going to be on the fed with the minutes out at 2:00 p.m. minutes from the last federal reserve meeting. jeff lacker of the richmond. writing, the fed's mbs holdings go well beyond what's required to conduct monetary policy.

talking a little bit about distortion. as this debate heats up about how they're going to exit all this policy. >> nobody heard them saying yesterday that rates in 2015 shouldn't go up at all. if a fed president speaks in the forest, does anybody hear it? >> my question would be why suddenly the markets have turned. nothing is particularly new that we heard yesterday. jimmy was making the point, maybe it's about market positioning. it would be interesting as we work our way through the hour to find out now why people have decided to sell. is it because qe is coming to an end and there's a vacuum of liquidity? is it because earnings season is a good starting point to sell the market? that's really what i think we have to try and find out in the next 60 minutes. >> all right. we're going to talk about that right now. the stocks look to recover from their worst session in over two month. let's bring in the chief investment officer and executive vice president of vimo private back. also, the managing director and principal at douglas c. lane and

associates. jack, why now? >> i think part of it is what simon mentioned, the end of qe. even though it seems like the fed really doesn't have that much influence over intermediate term interest rates anymore. the other is the fact that we had a lot of gum flapping from mario draghi and not much action. now it seems as though perhaps germany has put him under their thumb somewhat, even though they're seeing some downward pressure in their economy. they really don't want any monetary stimulation. they're preferring to try to do things on the fiscal side behind the scenes. >> people point out, look, the dow is only down 3%. russell is in a worse situation, back in correction territory. are you on the lookout for forced selling, either in small or large caps now? >> actually, i was on the lookout for forced selling in bonds with the bill gross departure. one of the things -- the first thing i looked at were the pimco

bond funds to see if they were going to trade at a substantial discount. they went from a 60% premium to a 10% premium. i think they're still somewhat in denial around there. i'm surprised. i actually think the bill gross departure is a watershed event for credit. we've got tens to $30 billion of bonds coming into the market. >> i want to focus on that. he's built big positions without moving the market that much sometimes. when you're talking about that, what are you talking about in particular? >> sure, so lower quality, some of the out of the way sovereigns. you're right. he was able to build positions in smaller sizes. now that all of this is coming out at once in tens and $20 billion pieces and there are no more trading -- >> you sounds pretty optimistic it's going to be that bad. that's a lot. it hasn't come out in that way

yet. >> well, i think they lost 20 billion in assets in their first day. there's a lot of money coming out. >> what about these factors? i mentioned bonds. the 30 year. i think i said 2012. it's actually may 2013, the 30-year bond yield. either way, what we're seeing with oil and bond and now into equities, what sort of picture is that painting? >> i think what you're getting is a deflationary picture. investors are afraid that, here we go, europe, ten-year in germany is below 10%. u.s. is now 2.3. where is the growth going to come? let's stell off the momentum stocks. health care, staples all doing well. the inflection point coming now is earnings are coming up. are we going to have companies that use this as an excuse and say, well, the dollar has become strong, we have no pricing and things are flat, or are we going to say, we have a nice tail wind because energy prices have come down, we have great balance sheet, and we actually have growth but it's moderate growth.

we're in the camp of there is moderate growth. this is going to be a good opportunity to get some really high-quality companies because you have seen a lot of companies sell off, even though the market's only down 5% or 6%. feels a lot worse. >> jack, your main clients, you're an ideal person to have on a time like this. what do you say to people primarily interested in protecting what they have? >> right now we're staying put. we did reduce our credit exposure in may and june. we thought it couldn't get any better than it did. >> do you think you'll be wrong on that call? >> right now we're holding dry powder. i'm hopeful we get spread widening, some sort of an event. >> and equities? >> in equities we're holding firm. thankfully we were underweighted in small caps because they were expensive. we do own europe and we're hedging the euro back. i think it's this week that's going to help us decide what's

going on. let's see what happens with earnings. we've got something that we can sink our teeth into, you know, to say are companies going to blame the dollar or are they going to embrace lower energy prices. we'll see how that shakes out. >> people are saying dollar is the new weather. >> absolutely. >> polar vortex. >> take, for example, spirit airlines today, warning about operating margins. if an airline can't benefit from lower -- that makes. absolutely no sense. >> yeah, that's a little different. the other big three, american, united, delta, are all doing fine. i think oil prices really helping them. spirit might have some issues that i think are fundamental to them. you know, the other -- transports are doing great. this is a great opportunity for any company that has input price attached to energy. i think that's something to watch for. the canary in the coal mine or just a one-off. >> a question on sentiment here as we see these sharp slides in the stock market. is it bringing the bears out? or is it a feeling of we have to

make some new lows or a correction here to make new highs? >> i think it's a combination. people have been so focused on the negatives. now the bears are coming out saying, look, we told you this was going to happen. we told you growth is slow, deflation it here, and now the dollar has become stronger. there is no growth. we should be in credit. the ten-year is going to go to 1.5. you'll see that. you'll see the momentum, the quick sellers get out. i think for us, the opportunity is going to be finding these good, quality companies when everybody else doesn't want to hold them again. >> sarah, i know you're a currency expert. >> thanks. >> the fact is the dollar was cheap. on a fundamental basis six months ago, the dollar was probably 10% to 15% cheap to the euro. it was certainly 25% cheap to the aussie dollar. >> so in other words, it's

getting back to fair value and not any kind of crazy overvalue. >> the tail wind may be gone, but i wouldn't call it a head wind. >> let me put it around the other way, which is how a lot of currency players would suggest. actually the fed was good at winning the currency wars. now it's failing to win that. draghi got the upper hand. that's the issue. the fed would really like to push the dollar down. that could feed through to what they say over the next few months. >> you're right. for the last 15 years, the fact is the euro has risen 35% against the dollar. that's been a huge advantage for us. maybe it's now that we pass the baton to europe, let them ease their currency. this is really our premise. >> we have to end it, but jack, the stock market and the dollar can rise at the same time. >> absolutely. that's my view. >> look, i could talk about the dollar all day long, but we have to leaf it there. >> and you sometimes do. >> thanks for joining us, helping navigate through these bumpy markets. >> as we kick off earnings seasons, let's focus on yum. reporting lower than expected

results, this as comparative sales in china, which is its largest market, fell 14% due to the food safety scare there is amid allegations that a former supplier used expired meat in part, though they would argue that isn't the main focus of their business. overall, same-store sales to kfc and taco bell each rose 3% while pizza hut fell 1%. actually, outside of china and india, kfc did really well. sales up 8%. operating profit up 16%. i think a lot of smart people knew the market was not where yum would report and its same-store sales would be much worse. on past evidence, as pointed out, when they last had a poultry scare in 2012, it took five quarters to turn that around. that's arguably what you're witnessing here. it's going to take time to correct. >> yeah, and they do lower earnings guidance for the year. now looking at six to person versus a prior 20-plus. also, operating margin down 270

basis points. they can't give the chicken away in china right now. >> and that's sort of where -- i'm reading some analyst notes this morning. really hard to see when traffic is going to come back. you mentioned the previous scare in 2012. an analyst at wells fargo points out that after then it was followed by an avian flu scare so it's a little harder. same with their episode in 2005. they are looking for recovery in china. same-store sales growth in 2015. it's just hard to tell when it's going to get there. >> the question, is it a buying opportunity on a big franchise? >> correct. >> this could be opportunity. >> unusually, the yum call goes on now, the morning after. more comments, more color from the executives on the call this morning. >> when we come back this morning, should you be buying into jcpenney's turnaround strategy? the retailer posting an analyst day this morning. interesting headlines coming out. we'll get a live report from that event coming up next. one more look at the premarket. not much energy after that drubbing yesterday. more "squawk on the street" live

from post nine at the nyse when we return. i was out for a bike ride. i didn't think i'd have a heart attack. but i did. i'm mike, and i'm very much alive. now my doctor recommends a bayer aspirin regimen to help prevent another heart attack.

be sure to talk to your doctor before you begin an aspirin regimen.

jcpenney is hosting its analyst day as we speak. courtney raeagan is at the even. we going to hear a plan for

long-term sales growth? >> that's what everyone is waiting for inside. that financial presentation is still probably a couple hours away. it is jcpenney's first true big company organized analyst meeting in about three years. ceo mike allman started off the event very simply, with little fanfare, no big presentation music. he simply came out and began going through the state of the company, where the company is and perhaps some growth initiatives, though not going into much detail. he said in july we had the same number of active consumers as we did in 2011. some of the growth initiatives that he listed off are the center core, the home store productivity, as well as omni channel. a key theme so far has been some references back to the johnson era and simply how far the company has come. it's been 18 months to the day since mike ullman came back. he said, look, the customer now knows we like her and we want her back.

cmo deb burr man also started her presentation with a quote, there's a fine line between love and hate, also presumably a reference back to what johnson had done when everyone said he more or less fired the customer. so lots of references to how far the company has come. they did a bit of a fashion show with some of the new styles that we can see for men and women. it actually was fairly impressive, in my very humble opinion. but we are yet to hear about any financial goals or any update on what exactly is happening with mike ullman and whether or not he will remain in the ceo position for some time or not. last we knew, they were still undergoing a ceo search. the company also saying that they have added a board member this morning. craig owen, he is the retired cfo from campbell's soup. carl, back to you. >> courtney, let me come in here. the stock has been under pressure for the last month. it's down even with the rise today, about 14%. there is some speculation they

might announce mass store closings. 30 or 60 more to take them to about 1,000. do you have any information on that? is that what you would expect them to say today? >> to be totally honest, i wouldn't expect massive store closings, simon. it's not because perhaps the company wouldn't want to do so to make the fleet more efficient, but simply because it's very hard to do because of the way that the leases work. they don't own as many stores as maybe some other retailers. so it's not totally in their control when they can close stores. also, it's very expensive. remember, one of the key things they're working on is cost savings. so you don't want to completely offset the cost savings with what it actually costs to wind down and close a store. so it's going to be something that will come up. it will be asked. i don't expect massive store closings. >> all right. speaking of expensive, a lot of analysts argue that the stock still reflects a multiyear turnaround. we'll see if it gets any action today.

courtney, thank you very much. meantime, shares is of costco moving higher in the premarket. the warehouse retailer beat estimates on the top and bottom line with its latest earnings report. helped by both higher sales and increased revenue from membership fees. take out currency, take out fx, comps are up seven and six in september. so the quarter managed to get out on a good note. apparel was one of the strongest items along with household wares. costco, of course, an annuity business to a large degree because of the membership fees. stock's up 17% this year. >> in a world that increasingly believes in discounting or a retailer that in the back to school season was demanding discounts. >> after four straight eps misses, the fact this was such a big beat is actually good. could signal the beginning of an upward revision cycle. obviously investors like it too. the reaction has been positive. >> surprising misses earlier in the year. no doubt about that.

when we come back, coming off of yesterday's selloff, we'll talk to art cashen what about he's expecting from today's trading session. take one more look at the premarket on this wednesday. a lot more "squawk on the street" from the nyse is straight ahead. how do you beat the number one seed? you just have to win 70% of your points at net. and keep unforced errors under 10%. on the ibm cloud, the us open analyzes 41 million data points from 8 years of competition to uncover key insights. data can help show you how to win, no matter what business you're in. today there's a new way to work. and it's made with ibm. and you'll see just how much it has to offer, especially if you're thinking of moving an old 401(k) to a fidelity ira.

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just about 7 1/2 minutes before the opening bell. let's get to director of floor operations at ubs, who joins us this morning at post nine. art, good morning to you.

you said you might expect a small reflex bounce. this is small. this would be small. >> yeah, it is. it's somewhat disappointing, but what the viewers are going to have to watch now is if we're going to get a retest of thursday morning's lows, which are 1926 in the s&p and 1077 in the russell. if we take out the russell and take it out rather severely, we have a problem because there's nearly a year long chart formation, a rectangle that would be wiped out. that would probably call for further selling. so a retest of thursday morning's low is likely. we better study for the test. >> we asked jack whether or not we're beginning to see signs of forced selling, forced unwinding, at east in small caps. is that happening yet? >> i don't think it's very large. you may see some positions getting wiped out. that could eventually begin to

compound. that leaves you with the paradox of everybody's worried about the stronger dollar and earnings season, but it's the small caps who don't do a lot of european business that are getting hit the worst. >> what's the risk into the fed minutes? there's clearly a debate about raising interest rates. is the bias in the markets toward a more hawkish view? >> no, i don't think so. i think even the strength in the dollar probably will keep the fed at bay. they'll read the minutes to see how widespread the discussion is, to see if we get past fisher, who really was involved. but i don't think the market anticipates the fed moving early at all. >> to a certain extent, of course, a change in the language might be obvious given the employment report that we had on friday anyway. if they indicate that, what is your feeling about the magnitude of what is going on here? yesterday was tough. but does it feel like we're poised for a major correction,

or are we just having rising volatility here in both directions? >> well, i think, yes, we're seeing a rise in volatile till. yesterday it was concern that europe was on the frontline of concern again. possibility of deflation arising. this time it's not the club med gang. it's all the way up to germany. and that caused people -- and as i said yesterday, there's always a risk of geopolitics coming back into this game. the battle for kobani, the syrian town, seems to be engaged. if isis is able to sweep in there -- and air strikes aren't very good in house-to-house fighting. if they sweep in and take that town, that will embolden them. they'll get new recruits and they may move on baghdad. >> finally, people argued yesterday's volume was heavy but not as heavy as last wednesday. that the selling pressure is easing. fair or not? >> to some degree. some of yesterday's selling, particularly in the morning, not in the afternoon, felt like it

was coming from europe possibly. you know, when the european markets get sloppy, you raise money wherever you can. the final hour of selling had to do with the market on close program. there was over $600 million to sell on balance for the close. >> art, we'll see you soon. thank you very much. the opening bell just a few moments away.

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earn miles in order to go visit my family which means a lot to me. ♪ you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in just about 60 seconds. coming off that 273-point drop on the dow, the worst day in a couple months. russell is back in correction territory. for the year, the dow is hanging on to a gain of 142 points. another day like yesterday, that could go away quickly. >> in europe, just as a point in reference, we've almost raised the gains for the year. the dax sits precariously above 9,000. that's another point to watch. >> meantime, david, people still buzzing about companies splitting up here, splitting up there. i guess we're going to cover allergan at some point. >> we are. should have done a bit more on it yesterday. never too late. we'll have more on that today.

of course, you're right, the overall theme of strength to grow that we kid about sometimes is in full force along with activism. we're seeing it yet again today on emc, which we'll also talk a bit about. >> opening bell. s&p at the top of your screen. at the big board, eagle point credit card celebrating its ipo today. bunch of names to get to. we covered yum. that's probably worth checking once again as we begin to look to some of the first big names to report earnings. 87 cents, did miss by a penny. revenue was short. china comps, of course, we knew that was going to be the story. the estimate was for down 13. we got down 14. they lower their guidance for the year looking at 6% to 10%. >> and the quotation there on china, same-store sales growth from yum management, while sales are rebounding, they continue to be negative. >> what's interesting is the

stock has opened in positive territory. it may be people were ahead of that in their thoughts. certainly the analysts wore. >> costco remains a big gainer of the morning. 158 beat by 6 cents. as we just told you a few moments ago, comps up seven for the quarter and up six for september. if you're looking for strength in a retail environment, that has been one of your winners for the year. and we'll keep an eye on headlines out of jcp today. i was interested in them saying they want to fit all body types, which sounded like the inverse of lulu lemon. >> i was going to say, bad reminders. when you look at the uphill road they have to climb to get to sales figures, even before ron johnson took over, 17 billion in sales, they have a little more than 4 billion to go. that's why that question of how they're going to drive long-term sales growth is going to be so key as courtney said, hoping for some sort of strategy there. not to mention the fact that he has to pick a new ceo. he just came in there as an

interim guy to keep the chain from bleeding. >> the board has to do that. but he's now not the interim guy. they have not actually been talking about a new ceo for a while. it does appear he's going to have that job for a bit more to come. but yeah, he did originally come in. then we stopped hearing interim. it's been a while now. >> but he did stop the bleeding. >> absolutely. >> a lot of analyst moves today. price target, 160, this is going to be about 18% upside. talking about strong replacement demographics in the medium truck market. better freight demand. you know, if you're generally bullish on the u.s. economy, you're going to guess that more goods are shipped around the country. intermodely, by road, that's certainly what they're counting on. >> i think in addition to that, it's the fact these diesel engines are in the middle of an upgrade cycle is. in other words, the technology around them has changed and

people will be tempted to replace the tractors, replace agricultural equipment. i think that's what they're aiming at. certainly a big call. 18% upside. >> grubhub, by the way, jmp nushuates with an outperform, saying they're getting good feedback from restaurants. one of the well-known ipos of the year. that's going to be an almost 2% increase. not anywhere near the highs since it went public. >> they like the margin story on this. >> just want to point out coca-cola. shares have been absolutely soaring. they're at the highest level since 1998. interesting research note came out commenting on this whole new idea of coca-cola going after big bets, taking a stake in monster, a stake in green mountain, which has been a big winner lately. analysts actually say eventually the company, coca-cola, will increase the stake in monster to full ownership over the next three to five years. something to watch. >> as we look at that chart, which is now changed, that ten-year chart k i thi, i think

gives a greater context. this is a very depressed stock. it's not made the types of gains the broader market has. >> how much revenue from overseas? well over 50. >> oh, yeah. that's huge. coke and pepsi earnings out tomorrow. pepsi has a lot of exposure to russia. it'll be interesting to see if that hurts pepsi. but among the consumer staples that have been selling off. a lot of these big multinationals that do a majority of their business overseas are going to be hurt by the slowdown in economics and going to be hurt by, of course, that currency exposure. >> pepsi has done fairly well. again, to this teem we were discussing right before the bell of breaking up or separating certain units, they are still under pressure. >> he's putting the pressure on. >> the activists will always say that. or they'll simply make the relative value argument saying it's up but not as much as it could be. >> well, and both up 17%, 18%.

they're actually tracking together so far this year. >> and analysts will tell you when you look at pepsi, let the activists, let the chatter play out for the meantime. the fundamentals of the story are good. it still has that faster growing snacks division, which is a majority of its revenues. we'll be watching that tomorrow. >> keep your eye on the airlines today. we mentioned spirit airlines warning on operating margins. they will have more details on october 15th. a lot of the other airlines doing fairly well here in light of crude oil at 86.88. obviously fuel along with labor the biggest expense for any airline. >> and let's not forget the selloff we had on ebola, which of course is the market positioning. arguably, you could be coming, they could say, from an oversold position. that's probably the bigger issue, i think. certainly that's what we've wngsed for the past -- previous two sessions. >> yes, we keep our eye on that story as well. some of these stories out of

spain now too. do they yut niez her dog. the story just keeps getting more and more. >> and the world bank coming out today talking about the economic impact of fighting the ebola epidemic, saying it could hit 32.6 billion by the end of next year. >> the interesting question is, would you now book a cruise? that's the -- it's the psychological aspect. would you book a cruise? would you go where there were lots of people? that's the bigger issue now. and the stocks and revenues will move on purely that perception. >> what about the airlines? is this a big risk for the airlines? can you buy these stocks until the outbreak is contained? >> we mentioned oil down. that's going to obviously hurt a lot of oil companies. baker hughes looking at some of the other losers this morning. national oil well, halliburton, and some others. eog. brings to mind the upgrade we got yesterday out of citi on some refiners as they think that differential between brent and west texas. if we're creating all this oil in the united states but policies don't change that allow us to export it, what is that going to do to the spread

between brent and west texas? a lot of strange dynamics going on in the energy complex. >> and a question as to how many shale projects need to get canceled if oil stays where it is. >> if cramer were here, he'd say watch occupant at 80. you're going to see not just production but jobs take a hit. >> it's been such an explosive part of growth in this country in terms of jobs. we've talked so often about what's going on there. if we were to hit that, you do wonder whether that would start to pull people off the rigs, so to speak, or from the frack. whatever you want to call those. >> and the action continues. the s&p energy group is the hardest hit right now. . >> all right. let's get to bob, see what's moving on the floor. morning, bob. >> morning, guys. we've got modest gains here. let's look at the sectors here. we have industrials finally bouncing a little bit. financials, industrials had a terrible time yesterday. number of new lows. still no bounce in energy. oil is down, although commodity complex, i see gold on the upside. we are waiting for energy to

finally show some kind of a bounce. a lot of people, myself included, talking about global growth slowdowns yesterday. remember something. we're in a very strange seasonal period right now. this has been very well studied for decades. we've got some head winds. right now october is behaving the way it always does. it's traditionally a weak month. we have some real head winds we're facing. we're about to enter into some real tail winds. november to january is the strongest time of the year traditionally. and there's even some little i think thats going on in between that. the week before midterm elections. traditionally stocks are up. my point is, seasonality in this part of the year does matter a little bit. we're in a traditionally weak moment right now. that may change. i mentioned that we need to get clarification from corporations on what the global growth picture is like. that's why we were so focused on yum yesterday. we really don't know a lot about where revenues come from. only half of the s&p actually break down their revenues by region. believe it or not, only 50%. of those, here's the breakdown.

asia oo is the largest category outside the united states. 60% of the revenues come from asia. 14% come from europe. isn't this interesting? asia is now a more important source of revenue for american companies than europe. next would be north america and canada. south america is about 6%. the total is about 50%. half of revenues outside the united states. only half of the companies actually tell us the information. we don't have complete information, and we're getting less and less all the time. maybe there's worries about tax inversions. they're not reporting and this is a problem. we need more information on what the companies are doing out there. in terms of companies, individual companies with big exposure to europe, you want to watch some of these. priceline, for example, big exposure to europe. mcdonald's. i'm going to put out a list this afternoon of a dozen or so companies that have 30% or more of their revenues -- this is just some i chose after talking with s&p this morning. but this is not a trivial matter

for a lot of these companies, what's going on in europe. that's why we spent a lot of time on chooi fla, another issue. you mentioned the yum brand. good news and bad news. the bad news is they're still seeing declines over there. the good news is that the trend is turning around a little bit. that's why i think the stock is trading up fractionally today. let's take a look at an ipo. didn't mention any ipos this week. hubspot pricing at 22 to 24 tonight. that's what they're looking for. they raised the numbers. it was 19 to 21. this is one of those cloud-based marketing. small deal but big area. inbound marketing. basically the idea is, how do you drive traffic to your business, to your website. the new way to market is write a blog, use social media. how do you know it's working? how do you know that it's effective if i do this twitter campaign or not? this is what hubspot does. they analyze traffic patterns on blogs, on social media, on websites to drive people to

individual sites. it's a hot area right now. we'll see how well it does right now. finally, 1145 today eastern time right here on "squawk alley," we'll be talking to mike rhodin, the senior vice president for ibm at watson. remember watson? it's been three years. we haven't heard much from watson. now they're rolling out new products. we'll see what they've got in store here. guys, i think cog any tiff computing, artificial intelligence, no matter what are you call it, it has a very, very hot future. we'll see what ibm has in store at 11:45. >> thank you very much. berth, how's it looking at the nasdaq? >> costco opening up at an all-time high after posting earnings that beat analysts, saying the 13% year-over-year earnings growth is the best they've seen from costco in five quarters.

symantec is the biggest gainer. looking into the possibility of splitting up into data and storage. that has the stock on the move. we've also seen a little bit of a pop here on biotech. seeing a little bit of strength this morning. the company that has the antiviral for ebola has another antiviral in the late stage that's posted some good trial results. meantime, tekmira has been all over the place. ceo quoted on the wire saying watching the volatility is like being in a shark tank. meantime, we have news on alexion. the company reporting yesterday that the chairman has passed away. they'll be announcing a replacement in the coming days. finally, rex energy this afternoon is going to be joining the s&p small cap 600. it's replacing gt advanced technologies. i don't know what folks are looking for there, but that stock is volatile. of course, gt advanced this

monday, surprised a lot of investors by filing for chapter 11 bankruptcy. david? >> thanks very much, bertha coombs. all right. we're going to take a little break. we have a double-barrel faber report. it's going to go on and on. >> pay extra attention. >> i hear the cheers. let's start with allergan, the story we should have hit yesterday morning. we noticed the inclusion of two words yesterday, strategic alternative. meaning, perhaps would allergan actually consider selling to something other than perhaps valiant. is there anything going on there? it's hard for me to tell you that there's anything going on. is there interest? most likely there is some. but both those things, strategic

alternatives and the story later in the day from reuters about activists, seemed to get bill ackman panicked enough to leak they're going to raise the offer by $15. that is true. in fact, it's unclear when they'll raise their bid for allergan. will it be in the next few days? originally the plan, according to my sources, is that they were going to raise it after earnings were reported on october 20th. we've given you a preview of those earnings. but they're going to be strong. they're probably going to give very nice guidance for the fourth quarter, hence their belief their stock price will rise. nice time to actually raise your bid. now that it's been leaked out there, perhaps they have to do it sooner. we'll see. you're talking about 12 days between now and then. we also get allergan's earnings on that day. that will be important for that company. don't forget, another important date here is october 31st. that's the record day for special meeting that will take place on december 18th, all of

which leads me to step back and look broadly at this and say, well, are we in the end game here? are we in the end game for allergan despite all of its efforts to fend off. are we at the end game where allergan says, all right, let's see what we got. can we consider activis? is there somebody else out there we've kept in our pocket? then there's the debate about which is a better deal. which is more accretive? we have $2.7 billion in synergies. other analysts will tell you, activis can do it as well.

they say, we still think here's what we think they can do. we still believe that potential stock price appreciation will occur with vrx and agn is still higher. talking 64% with a 17 pe. that's the next one, guys. sorry. i'm moving fast here. we also want to get to emc. as for isi, it says a possible actavis-allergan combination will be in the mid-high single digit. no real word from allergan what's going on. all right. let's move on now to emc. also involves hewlett-packard. this morning, elliott, for the first time -- remember, "the journal" did report on this. elliott go public on its position, saying we want to you spinoff vm to shareholders and consider doing other things to core emc, including m&a.

here's a bit from the letter. in order to realize the intrinsic sum of the parts, a tax-free spinoff could be initiated immediately. once vm ware is separated, with believe core emc could and should add leverage to repurchase stock. it is on that front that i wanted to end on hewlett-packard. of course, we talked a great deal about the plan to split that company. but you may have noticed that in even its latest press releases, hewlett-packard chose to refer to its big in possession of material nonpublic information is the reason why it still won't buy back stock. it's a strange one on their part to continue to have this in their releases. but they are still talking in a way to emc. yes, the two companies were unable to reach any sort of an agreement. by the way, the deal that they had considered, an all-stock deal under which hp would have bought emc and also tried to figure out a way to buy the rest of vm ware and then split the

company so that emc shareholders would have gotten a share of what's now going to be hp ink. it's still possible p unlikely but possible, the two sides weren't able to agree on price. hp wanted in that market deal. emc wanted a slight premium, all stock. doesn't mean it may not conceivably be revisited down the road should either one of those respective positions change. so that is something else to add in here as you see elliott continuing to apply pressure to emc in the belief, perhaps that, if it were to announce its own split, it would at least very more leverage over those companies that might be interested in doing something with it. all right. >> presumably if hp splits and then its market price corrects to a higher multiple on enterprise, which is what it believes will happen, it then rebalances where it could do the deal with emc. >> it still could. it would be a bit smaller.

the hp enterprise business. that includes obviously vm ware. they'd want vm ware. it can become a more complicated transaction. to your point, it's certainly not something that would be off the table. >> think it's why they did the split? >> no, i think they were thinking about the split in relation to an emc deal and continued to move down the road when the emc deal, they just couldn't get there in terms of agreeing on price. let's head to the bond pits now, check in with rick santelli at the cme group in chicago. >> hi, david. well, it's no secret that the treasury market's not doing very poorly. as a matter of fact, if you look at the dax, about ready to make fresh one-year lows. total return on a 30-year bond, over 20%. let's look at an intraday and two-day of tens. this thing is really volatile. maybe it's over to the downside, upside in price. when you match it up with two day, you can see we're scaling down. open the chart up to mid-august. we're flirting with the lowest yield closes since the end of

august. 24-hour chart. notice the low yield there? 88 basis points. open the chart up. we basically did a touch, a tap of the lowest closing yield ever for boon, which happens to be 88 basis points. hey, i talked about the dax. let's look at the dax. two-day chart. it's not down as big today as it was yesterday. but when you open this thing up to a one-year chart, what you're looking at is potentially not only making a new low for 2014, you're getting very close to making a new low going back to november of last year. pay attention to this chart. now, if we look at the euro versus the dollar for two-day, it's kind of going flat line here. all that volatility seems to be holding off a bit as the equity markets take volatility charge. back to you. >> all right, rick. thank you very much. rick santelli. when we come back, polaroid ceo. you'll want to the see his company's answer to go pro's cameras. tomorrow, a live interview with imf manager christine lagarde on the state of the global economy.

"squawk on the street" will be right back.

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let's get a look with jackie deangelis. >> that's right. west texas intermediate, 87.38, down about $1.50 at this point. brent prices under $92. we have a crude inventory report coming in about 30 minutes' time. this is a supply story. the markets are well supplied. a lot of articles out this morning talking about exports. that's an issue that's been debated lately. also, of course, we're wondering about the sustainability of prices here. both internationally for the producers and domestically as these prices continue to tank. meantime, i do want to touch on gold prices because we're seeing a little bounce today on short covering. a couple of days ago we hit that 11.85 double bottom but couldn't breakthrough. so investors are a little nervous. a little bit on the safe haven trade. more "squawk on the street" when we return. cute little guy, huh? this guy could take down your entire company. stay with me. on thursday a hamster video goes online. on friday it goes viral - a network choking phenomenon.

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jaffrays shows teams are not all that excited about apple watch. >> and find out how 3d printing helped save the life of a 2-week-old baby. >> but first, let's have a check on where we are with the markets. you have a modest rebound after yesterday's losses. we lost 273 points on the dow. the chief u.s. economist with jpmorgan joins us. also, the senior vice president and senior portfolio specialist with the westward funds. gentlemen, good morning. >> morning. >> morning. >> david, is this pause one that you think will refresh it, or is this the start of a bigger correction? >> well, we would certainly like to think that it's a pause that refreshes. i think a big factor is going to be earnings season, which starts here shortly and whether or not we continue to see the kind of earnings growth that should drive the market fwarpd. we're big believers that going forward, earnings growth and economic fundamentals are going to be the key drivers of investor sentiment and of stock prices as the fed continues to

move away. that'll be a big factor. ultimately, consolidations like this tend to be healthy. if you look at the u.s. economy, we would say you need to stand pat and continue to invest in u.s. equities. >> do you need earnings to rise in order to justify the levels we're trading at now, david? is it kind of an argument that you need first to remain at these levels, or do you think they'll actually push the market higher? >> well, simon, that's a good question. i think ultimately over time, we would expect the market to track earnings groetd. we've seen that this year. the past two years it was pe multiple expansion that drove stocks. this year it's been earnings growth. yes, we would like to see earnings continue to go higher to drive the market higher. i think today, right now, though, investors really need something to grab hold of to give them confidence that the market is at a valuation that makes sense. and a strong earnings season would be a key catalyst there. >> mike, we were trying to work out why suddenly the market would, a, get this volatile and

yesterday move down to the degree it did. one argument is that a lot of investors in this country were focused on the great growth that we have here, the best in ten years over the last few quarters. suddenly it was the realization that this economy is going to have to do a lot of the heavy lifting next year on its own because there's nobody really growing substantially behind us. do you think that's a fair assessment? i mean, how do you actually match the move on the dollar with the fall in the price of commodities, for example? >> right. so i think thus far what we've seen with the dollar just about offsets what we've seen with falling energy prices n terms of the at least the next few quarters. longer run, the move up on the dollar could weigh on manufacturing. at least in the next quarter or two, we think the support from falling energy prices is going to be a pretty nice lift for consumer spending. so near term, we're actually relatively comfortable that the type of growth we saw in the third quarter, which is around 3%, can persist on into this quarter and next quarter.

so as i said, right now the forces of stronger dollar, weaker energy prices look to be roughly about offsetting. >> my question on the fed, it's hard to keep track of all of the comments and opinions of the last 24 hours from different regional fed presidents. clearly there's a divergence of views when it comes to normalizing policy. going into minutes today, is the risk ultimately that the fed waits too long to raise interest rates or goes too early? and what are the chances it gets it right? >> well, i think they're already showing that they're choosing to wait too long. i say the that not judgmentally. but given where unemployment and inflation are right now, most would say the funds rate should be at 2%, 2.5%. so they're already by design waiting too long. that seems to be a risk they're willing to take, given that we don't really see any wage inflation or prospects for price inflation. as you said in terms of the fed speak, yeah, it's been all over the place.

it kind of always is all over the place. you got to obviously, you know, see who's speaking. we've had a couple doves speak this morning and yesterday. and they're obviously leaning toward waiting even longer. lacker is on his own in term of his views on mortgage purchases. >> let's see what we get from the minutes this afternoon. guys, thank you very much. >> meantime, ebola survivor dr. kent brantly, the first american flown back to the u.s. after contracting the virus, has donated blood to help an nbc news cameraman. the freelance cameraman, to fight the disease. our meg turrell is live where an infectious diseases of america meeting is taking place. zb >> reporter: that's right. ebola is front and center at the meeting this week, which just started in philly. the first case of ebola was just contracted outside of west africa in spain. health systems are making moves to make sure they're prepared. the state of connecticut has declared ebola a public health emergency, even though they

haven't seen any cases there. that gives them the power to quarantine folks quickly if there are any cases. of course, there's still just one patient who's been diagnosed with ebola on u.s. soil. that's thomas eric duncan, who's being treated in dallas. he's on a respirator and receiving kidney dialysis. he's receiving an experimental drug. it's important to note that 48 of his contacts are being monitored. none have shown any symptoms of ebola more than a week after he was diagnosed. of course, ashoka mukpo is receiving blood from dr. kent brantly. at this meeting we're talking to a lot of doctors about ebola. we just spoked with a doctor at emory university, who was one of the treating physicians for dr. kent brantly who said we don't know enough about these experimental drugs. sarah? >> all right. thanks very much for the update.

on another note on ebola, the world bank saying this morning that the economic impact of the epidemic could reach more than $32 billion by the end of next year if it continues to spread. we'll talk about that with the president of the world bank. he'll be joining us live tomorrow for a first on cnbc interview. now let's send it over to dom chu for a quick market flash. >> let's stay on that theme. check out shares of chimerix on news that its experimental ebola drug improved the overall survival rate in patients with a certain type of respiratory infection in another late-stage study. again, maybe used on another type of a disease here. the stock is currently up about 5% on the day's trade. back over to you. >> all right, dom. thank you very much. when we come back, the apple watch is supposed to be the next big thing in tech. a new survey says teens are not that interested in the gadget. piper jaffray's gene muenster

has detail os than. plus, costco getting a boost as they top estimated for the first time in five quarters. should you be buying in bulk? "squawk on the street" will be right back.

shares of costco rallying this morning after the big box retailer beat earnings expectations. stronger sales and fee revenue lifting their profit by 13%. let's bring in cnbc retail analyst on this. >> good morning. >> after a rough few quarters, is this vindication?

>> it is. you know, costco was putting up incredible comps the last six months. they've put up on average a 6% comp while everybody else in the space has really been pretty lackluster, especially if you look at sams, for example. this quarter they finally beat on the bottom line. the margins were a little better. importantly, those membership fees had a bit of a boost this quarter. so not only getting the comp now but a bit of the bottom line finally flowing through. >> fees. sams club has a lower fee, right? i just wonder, are they still a lingering threat? >> yeah, i mean, the fees aren't that different. they're not hugely different there. i think about $5 less at the entry level at sams. also, the sams club customer is a little bit of a lower end, more of a walmart customer. costco's speweet spot is really the higher end customer, those who make the $100,000.

even as they increase membership fees slightly, that demographic is willing to pay to come in and get good deals on bulk items. >> i wonder how much costco's going to be hurt by some of these factors that we've been talking about in the markets. they sell gas. that hurts, these low-energy prices. last i checked, about 28% exposure abroad. that could hurt on the foreign currency translation. if those are prolonged trends here, will that cut into those great comps? >> yeah, that's a good question. that's largely why costco breaks out comps with gas and without gas. we know gas is down year over year. so certainly that's been a head wind, which is why they break out the higher gas comp here. certainly, you know, gas that they sell is cheaper than the guy down the street. so they still gain share even if gas is a little less expensive. and, you know, of course on the international front, you have those fluctuations, which you talk about all the time. so, you know, there is some movement there, but i think

really what you want to look at here is the core comp, which is still beating here, and the fact that really that's starting to flow through to the bottom line. >> how much panic at costco is being driven by -- i mean, i know new york is not the center of the universe, but you can get google shopping express, amazon is extremely efficient at delivering the kinds of things you get at costco, other than fresh food. how big of a deal is that? >> it is a big deal as more and more services offer flat fees like amazon and say for $79 a year, we'll send you everything you want. so that is a pressure here, but i do think that that higher income consumer, not only do they like to go into the stores for that treasure hunt, but they also find that costco has more premium products and better deals if you look at the brick and mortar competition. kudos to them for holding their own in an environment where most retailers are getting crushed in

terms of traffic from online competitors. >> finally, i'd like to get your thoughts on what's coming out of jcp today. >> so far it sounds like a bit of optimism. last week i was at the world retail congress in paris where he spoke. he seems somewhat optimistic. you know, when he talked a little bit about the company. but today they're talking about the brands that they've brought back, some of the private label brands that ron johnson yank the from the stores. doing well, the consumers responding. we haven't heard anything about comps yet. so far it sounds like it's starting off on a bit of an optimistic note. >> we'll see. i know they're doing women's jewelry right now. as the headlines come in, we'll talk more about it. stacy, thank you. >> see you soon. in the meantime, a new report on apple this morning. and it's not good news for the apple watch. piper jaffray's gene muenster writing teen interest in the apple watch remains tepid, as he put it. actually declined somewhat since the spring.

gene joins us now from minneapolis. welcome back to the program. >> hello. >> it's a big survey you've got here. over 7,000 teenagers. >> that's right. this is an institution we've done at piper jaffray for two years. we do it twice a years. we have some great data to look back to. the interest in the watch was modest at best. i think what's really going on there, what's driving that 16% number, 16% of teens in the u.s. say they're interested in getting an i-watch, what's driving that is teens don't wear watches. i think there's kind of a structural shift that needs to happen. i think in general, people just have been obviously using their phones more to tell time. so i think that's one of the head winds the i-watch is going to face. >> yet, you've conducted the survey before. they didn't have a chance to see it, did they? >> it was about half an half. it started on august 25th and ended on september 30th. about half of them came in before. >> my bigger question is, do you

really think it's teenagers that will buy the watch or parents and relatives that shell out $350? that seems more likely to me. what do you buy the brat that has everything? >> well, probably eventually you buy that brat a watch, but i think in the near term you're hitting a great point. this data needs to be taken in the context of how investors think about this. i think investors have modest expectations right now about the watch. i think adults are going to be the primary buyers. i think the real value is going to develop as developers build applications for it. so this is a long road. it's a new category. it's going to take time to take off. >> hey, gene, this is a really critical juncture for apple as we enter the important selling season. i think next thursday they're announcing new details on the imac and ipads, which is a relatively soft release. then it's earnings, isn't it, like a week on monday, october the 20th? >> that's right. i mean, the real core question near term is how is the iphone doing? part of the teen survey results were encouraging for that.

the interest level in buying a phone, an iphone, increased from 67% in the spring to 73. that actually had an uptick. their core franchises couldn't be doing better. samsung's woes are being caused by apple. as an investor, the momentum in the business continues to be very strong. i think we'll see that in a positive guide higher than the street for the december quarter. >> hey, gene, the survey also takes a crack at go pro and asks them how many of you want this on your holiday wish list. four times last year. >> yeah, wasn't very many. i'm not even sure of the go pro numbers off the top of my head. >> i noticed you did take it to neutral but kept the $90 target, saying there's little room for upside. interesting data point. >> i also saw that you put the tablets -- i was looking at that, as these iphones get bigger, will teens and young people still want tablets. looks like apple still has a

good share. but microsoft got 10% of the share. what's happening in the tablet world? >> yeah, that was a big surprise. one of the negative points on apple was that interest levels in ipad declined from 66% in the spring to 60% in the fall. microsoft saw an uptick from 10% to 16%. i don't know if this is the nfl kind of playing well with teens and some of their surface branding, but at the end of the day, teens can actually use the surface tablet to do real work. i think that's probably what's playing into some of those numbers. >> okay. we'll leave it with the bottom line that you believe that apple at least is worth $120. it's still a buy, gene, yeah? >> that's exactly right. stay long here. >> good to see you, sir. thank you. >> thank you. >> all right. let's get a quick market flash here from dom chu. >> hey, carl. so what we're watching shares of sears holdings right now. the stock is moving lower on a sharp move to the downside on a bloomberg report that a vendor is reportedly withholding

shipments to the company due to insurers reducing their coverage for those shipments. that stock down towards session lows, off by about 12%. we should also note that options trading right now, bearish put options are outpacing bullish call option trading by about a two-to-one margin. again, markets are taking notice of this bloomberg headline. back over to you. >> interesting. i think it was earlier in the week s&p made a comment on how jcp's turnaround is making sears' turnaround look terrible. >> more difficult. listen, they have been trying to shore up confidence at sears. this is the kind of thing that obviously destroys confidence. again, i don't want to comment on another news organization's story per se, but most recently the $400 million loan. you had the land's end dividend paid to them. the whole idea is to shore up confidence as they head into the

holiday season so that their vendors feel comfortable shipping to them. these kind of reports, of course, have the opposite effect. >> all that the middlemen, the financers are having to underwrite the orders. >> and the options market has been going crazy with this. the cost of bearish options now at an all-time high. >> a lot of these shares short. you have 48% owned by esl. you do not have a lot of shares out there at all. this is a tightly controlled stock. it had been moving up until this report lately from lows it hadn't seen in a long time after the loan we first talked about, chb concerned people. >> well, big, big drop today. down now 12% for sears. up next, the multibillion dollar money manager making a big bet on the housing market. we'll talk to him about his strategy after the break. act i. scene 3.

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want to bring our focus to housing now. our next guest is making a big bet on the health of the housing market in this country. he's head portfolio manager of the angel oak multistrategy income fund. let's bring in the co-founder of angel oak capital. brad, what is the view on housing? how are you playing it? >> good morning. we're really seeing some maturation in the housing market. i think that's the key. what that may not mean necessarily is double-digit home price appreciation. what we've had is an easing of distress in the market. we may have had a watershed moment even last week with chairman bernanke, former chair bernanke admitting and being so brave to admit that his refinance was difficult to achieve recently.

so the easing of credit over time, i think, is what is a bigger story. the untapped potential in housing is really not being spoke b of too much. i think that's one of the key points. another key piece as well is the disappointment in household formation across the country. there's been some speak about millennials and the improvement in wages that they have. but i'm really just not a subscriber to be the thinking that anyone under the age of 30 is going to be living with mom and dad forever. >> well, that's one of the problems. we've also seen home prices lose the momentum. no question what the data has shown is it's going to be bumpy and uneven. >> yeah, it's absolutely going to be bumpy. certainly on a month-to-month basis. if you look at these markets over time and you're looking at figures where strength in housing may not be expressed necessarily in home prices with

double-digit growth but potentially in areas like housing starts, which even last month were a little bit softer but really have reached a six or seven-year high the previous month. new home sales was extraordinarily strong as well. my theme is really to take advantage of any of the opportunities that you see. any perception of weakness in housing over these next several months i think makes a lot of sense to take advantage. i happen to be a bond investor. >> i want to take you back to ben br nan key's comments, which you said you thought was one of the most important developments. a lot of people watching also think it's really important that he chose to say, i can't get a mortgage with assets at $1.3 million. an accusation that actually credit standards are tightening in this country despite the economic expansion, despite higher house prices that actually lenders are getting tighter on the criteria, as tight as they may have been for 15 or 16 years. now, i imagine for you with mortgage-backed securities, that's a positive.

>> well, we tend to focus more on the private label mortgage market, as you point out is extremely tight right now. we've seen a very small degree of easing in those standards, some of the more recent senior loan officer surveys have begun to improve as well. what i think is important here, raeter than focusing on how tight it is s the potential of this being an inflection point in that tightness. we may look back at these previous months that we're looking at now and say that this was the time where we began to see some improvement, some easing. that combined with the household formations, which should come over the course of the next several years, i think, is something that will dwarf any of the conjecture back and forth with some of the volatility we're seeing in the housing figures right now. >> we'll have to see, brad. we'll have to bring you back on to talk about the fed's role in your world. it's good to see you for now. co-founder of angel oak capital.

>> straight ahead on the program, former treasury secretary tim geithner is testifying day two on the aig bailout trial. we'll get a live update from outside the courthouse when with e come back. 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.

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barrel build this week. we did see estimates looking for about a 2 million barrel build. so this is a very bearish number right now. of course, these prices were drastically down this morning. seems like the market was anticipating this. right now we're looking at wti at 87.39, down about 1.50. i want to get more color on this with one of the options traders on the floor. peter is joining us, always great to see you. your reaction to the number? >> well, there's not much of a reaction to the number. as you said, it was already in the market. i think the biggest news you have here is opec discounting barrels rather than cutting production. also, you had the brent wti spread come all the way in to $2 now. and when that spread comes in, it means lower product prices, lower gasoline prices, which all means it's good for the consumer and not good for the refiner. >> right. and we've been talking about the supply story for quite some time right now. this market is oversupplied. this number is reflecting that as well. how do we get that supply/demand balance back in check? >> i don't think you really do.

it all depended upon what you saw people like opec do. i don't think they're doing enough about it. the glut looks like it's going to be around here for a while. the biggest thing we have now is the domestic production that we've never had in the past. you have a glut. you have domestic production being bigger than its been in a long time. with that one-two punch, it looks lower to the downside. with the settlement below 87.50 today, the next target is 85.60. we haven't seen those levels in a long time. >> everybody is talking about exports right now. we haven't seen this since the '70s. the issue has been off the table. is it time to start exporting our supply? >> i think it's a great idea in terms of jobs. great for our economy domestically. is it good for prices? is it good for the consumer? probably not. >> you told me earlier oil prices could go to $85. how quickly can we get there? >> we could go there tomorrow.

>> that quickly? >> that requequickly. now that we broke that monthly low of 88.13 we were looking at, it looks as though where it could go to the downside is just about anywhere because we're sort of into a new long-term territory. >> and how much of this right now is dollar impact, that dollar strength that we're seeing? >> well, definitely when you see the dollar strengthen up like that, that also helps the situation. >> and you mentioned gasoline, good news for consumers. we're seeing average prices in a lot of states under $3. where could gasoline prices go? >> looks like gasoline is going to lead the way to the downside. since you used to see the brent wti spread at $6 come all the way into $2 f that continues on, you're going to see much lower gasoline prices. >> all right. thanks so much. guys, back to you. >> all right. thanks very much, jackie. talking oil. meantime, tim geithner is in the middle of his second day of testimony in the aig bailout trial. our mary thompson is live at the courthouses in washington with the latest. good morning, mary. >> reporter: hey there, sarah. and hour into questioning on

this second day for former head of the new york federal reserve, tim geithner. it's clear where the plaintiff's lead attorney is going. in the last hour, he has questioned geithner about the doomsday binder he allegedly carried around the new york fed during the financial crisis, a binder that allegedly contained legal documents outlining what the federal reserve or government could do in times of exceptional circumstances such as the financial crisis. he also asked geithner about what with the government's role was at aig once it took an 80% stake in the insurance giant. and geithner replied, it was basically monitoring the company. but he's pushing back, questioning geithner has to whether he had any input into deciding who might be a board member of aig and whether he had any input about compensation, he or other government officials. now, keep in mind at the heart of this trial is whether or not the shareholders at aig were properly compensated for the

stake the government took in the $182 billion bailout. also, were its actions at aig within its legal scope? you can see that's where the attorney is focusing in on with today's line of questioning with geithner. now, this class-action suit seeks damages of up to $50 billion, alleging the government didn't compensate shareholders properly and treated them unfairly, imposing harsher terms on the bailout. the next big name to testify, of course, will be federal reserve chairman ben bernanke. he is considered one of the three architects of the government's response to the financial crisis. he was supposed to be here today. his testimony got pushed off until tomorrow because geithner is on the stand a little bit longer than we expected. it is expected he could testify through lunch today. of course, we'll be here throughout the session with updates. back to you, carl. >> thank you very much, mary thompson. when we come back, how a 3d printed heart helped save the

life of a 2-week-old baby. be sure to tune in tomorrow for a first on cnbc manager with imf manager christine lagarde. dow is up 11 points. be right back. today could be the day. the day we give you hope. relief. a cure. today, we believe every life deserves world-class care. as one of the top four hospitals in the nation, over 100,000 people from around the world come to cleveland clinic for care each year. and we're ready for you with a second opinion

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some choppy action on the s&p as we're down to 1932. dominic chu is back at hq. >> up by about a quarter of a percent. health care is leading really the second-best performing sector in the s&p 500. allergan is one of the leaders today as bill ackman and valeant increase their bid. other gainers include perk perkin elmer.

health care is also the leading sector so far this year in the entire s&p 500. back over to you. >> all right. thanks very much. dom chu for that sector report. up next, an amazing story about how this 3d-printed heart helped save a baby's life. we're back for that conversation after a quick break. your customers, our financing.

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with the dow beginning to head down into negative territory, let's get to rick santelli in chicago for the santelli exchange. >> thanks, simon. i'd like to welcome our guest for this wednesday morning, lewis woodhill. thanks for taking the time, lewis. >> good to be with you again. >> i like a lot of the pieces you write. friday we had what was perceived to be a pretty good employment report. we've had a string of positive months lined up in a row. if somebody was unaware of the condition of the late bobor mar right now and you had to give them an objective overlay as to

what's going on, sum up the employment condition and the improvements in your opinion. >> well, from an employment and income point of view, this is still a depression. with luck, it will have taken seven years to get back to the employment level we had in november 2007. and real family incomes are about 6% lower. >> the federal reserve and many central banks have used an awful lot of stimulus. wasn't this liquidity supposed to basically turn the middle class investor or the middle class citizen into somebody that had access to credit after it all dried up after the credit crisis? is that the way it's turning out? >> no. the federal reserve doesn't seem to realize their interest on reserve policy completely nullifies the stimulus of quantitative easing. quantitative easing was actually

contractionary, at least qe-3 was. >> when it comes to the end of qe in october, is the market really that simple? all this extra volatility we've been having and the dow now turning negative, is this because of october, or is it more? >> no, it's more. basically, you need a stable dollar to have a growing, prosperous economy, and we don't have that. right now we're actually in a deflation. the third quarter, the crb index -- or the value of the dollar against the crb index actually rose by 12%. >> now, you know, the stronger dollar, i get that. i'm not really -- i don't really have a problem with that. i understand multinationals might. but is the story really of the dynamics in the u.s. economy pushing the dollar higher? i know it's semantics to some. or is it just the european community and japanese community having issues that translate into their currencies being weaker, whether by design or

unintention? >> well, actually, the euro has got more valuable against the crb index by 2%, the pound by 5% in the third quarter. everybody's deflating. it's just the u.s. is deflating more. >> my last question i think is the most important question of all. we all know despite some of the ramblings of the administration in front of the midterms that the recovery has not measured up to previous recoveries. is the fed's strategy to carry the water on its own and to try to accomplish the mission by managing rates lower a valid strategy? last answer. >> no, interest rates aren't the issue. the value of the dollar is the issue. the federal reserve has let the value of the dollar go up and down plus or minus 28% while they had the fed funds rate constant. janet yellen's got her hands on the rearview mirror instead of the steering wheel. >> excellent. lewis, it's always fascinating. you put together some interesting metaphors. i'd like to have you back again,

of course. thank you and let's go back to carl quintanilla. >> all right. thanks so much, rick santelli. doctors at new york presbyterian morgan stanley children's hospital saving a 2-week-old baby's life with the help of 3d printing. the doctors were able to use the technology to print a replica of the child's heart, making the process a lot more simple. joining us this morning is the doctor who performed that surgery. the chief of pediatric cardiac surgery. great to have you, doctor. >> good morning. >> i'm fascinated by this case. what was the condition of the patient, and what did this allow you to do? >> right. so the baby was born with a very complex, unique malformation. lots of holes inside of the heart, different abnormal geometry inside of the heart. in the past, you had to actually discover everything at surgery. you go to surgery, stop the heart, open the heart, look inside and then decide what to do, how you were able to repair that heart.

we only have a limited amount of time during open-heart surgery to do what we need to do. with this technology, which is 3d printing technology, as you mentioned, we are able to actually look at the heart in advance and plan our surgery. we can actually even cut those models and look inside the heart so that we can actually know beforehand, have an idea of what we're going to do, where are we going to put our sutures, the patch patches. for this particular baby, it made a huge difference because he went from having a limited life span to a normal life expectancy. he went from needing three or four surgeries to needing just one surgery. so it made a big difference. >> was this expensive to do? you printed it out from a ct scan, right? >> it was printed from a ct scan. this was a company called materialize who did this. it's about a few thousand dollars. i expect this would come down, the price would come down. >> what else can this allow you

to do? i would think this is a leap for medical technology in the way you do surgeries going forward. >> so for people like us in congenital heart surgery who deal with complex 3d structures, it's a huge advance because now we don't have anymore surprises. we go to the operating room confident we know exactly what the anatomy is like. so our outcomes obviously are going to be better for the benefit of the patients. >> i assume this is going to go way beyond hearts, right? talking livers, kidneys, prostate, what? >> neurosurgery, bone, orthopedi orthopedics. i think everybody who deals with fixing 3d structures benefits from this because the visualization was difficult before. >> i mean, your area of expertise is obviously not in this physical printing. from what you can assess, where does the value lie here for an investor? is it the software that takes the mri scan and then transfers it to the printer? because the physical printing

process must be quite generic or will become relatively generic. >> yes, way out of my expertise. i fix hearts for a living. >> sure, but you understand the process. >> i do understand. i do think this is something that we're not going to do without, if thatwithout. so we willtechnology. it is going to be standard of care. in the past you had a chest x-ray and another study. now you will have this. it's going to be widely disseminated. >> a 3-d printer in all hospitals all training facilities. >> i don't have any doubts about that. >> you indicated there might be a number of surgeries to come but in in case there was only one. it's fair to assume this took cost out of the equation? significant cost i guess for the medical system. >> exactly. and in addition to the benefit of the patient, huge cost savings. one surgery instead of three. he stayed in the hospital about a week after the surgery and went home which was very fast for this kind of surgery.

and the other scenario he would have stayed in the hospital longer and required much more medical care and more cost. >> i got to imagine insurance you think will cover this kind of print out? >> they should. because again, if it cuts costs it is good for everybody. >> finally asking during the break, even with the preseintou once you got in is there room for surprise? or is this 100% reliable? >> i don't think any surgery would ever rely 100% on any test given to him or her. you always want to be expecting a surprise when you go for these very complicated cases. >> amazing story. thank you for coming in and telling it. >> sure. >> we've got breaking news now on ebola and travel guidelines. eamon javers in d.c. >> administration official telling nbc news that travelerers from the west african nation most effected to ebola will now be separated to

additional screenings. those travelers will have temperatures taken and will be initially at the five largest airports in the u.s. also. new measures designed to stop the spread of ebola coming into the united states and responding to concern about air travelers that there might be ebola spreading around the world. >> a show you don't want to miss. big tech companies have been breaking up like high school crushes. the rumors that salesman tech might be next. semantic. microsoft's management, bill gates signs off on and who makes the final decisions there. and that and more next.

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if we can't get your things there too. it's no wonder more people choose delta than any other airline. stocks are losing steam here. let's send to it dom for a crick market flash.

>> monosanto. lower than expecting aerjs for fiscal year. but it did however narrow fourth quarter loss on better than expected sales. edward jones saying the seed product should continue to be popular with farmers. the stock is marginally down by about a half percent on the day. back you do. >> thanks, of course the breaking news is that the federal government is coming forward with new guidelines how to deal with passengers on airplanes for the ebola crisis. some of the airlines are in negative territory. it tells us though i don't think this was as great a concern as they had. >> no but we have been watching the airlines be under pressure the last week. the impact on travel just one of the considerations you have to take into effect on the spreading of this epidemic. >> yes, delays are important for southwest and jet blue that are running tight schedules but for big international carriers like united and deltas the more the

concern people simply won't fly. that's why you have the heavy selloffs. so that is the greater context and spirit actually -- >> while looking at some of the big stock movers i want to mention seriars. this stock was tanking after a report that one vendor was withholding shipments because of insurers reducing coverage. there is the dive on that report. sears currently 12% lower. and. >> reporter: and that is important. it is the fear that these mill men, the factors will not ensure the shipments or the orders in the first place, basically give a lot of the manufacturers the money to execute on the order. they are not willing to lend that because they are concerned about where sears potentially may ultimately go. so this is a judgment that somebody is making that could have huge implications across that whole territory.

>> and jc penney is in focus today. they are holding a meeting with their analysts. what is going drive long term sales growth now that there is a turn around at least that we're seeing sales turn positive. so that is going a stock to watch in today's session. >> or shut down stores. >> right now the dow down 40. s&p 500 down about.4%. the fed minutes are going to be very much in focus at 2:00. >> a damp squid. all kinds of questions are they going change the language moving forward and it's been outdated by the employment report. obviously they are going to change the language. they can't say they key rates lower for a considerable amount of time. >> and the bond market, slightly stronger today. also yields had been near the

lows following that brutal selloff in the equities yesterday. so we're watching that head foog is the fed meetings as well. >> loads of warnings. >> you're off to washington. send my regards. >> i will. >> back you do. >> good morning. almost 8:00 a.m. at symantec headquarters in california. 11:00 a.m. here on wall street. squawk alley is live. good morning, welcome to squawk alley. joining us is john steinberg.

ceo of the daily mail north america joins us from the london. john forth, kayla once again. s&p awfully close to session lows. the russell has taken out lows from last thursday. as we get closer to that european close, this tends to be where the jitters begin. and we'll see where the afternoon brings. >> we saw a slight bounce after the european close yesterday but it was short lived. yesterday was the biggest point drop for the major averages. the fourth biggest all year. given the volatility in recent weeks, yesterday certainly was an indication how much this is ramping up. the today's slide would look a little more tempered compared to some of the escalation in prior sessions this early in the day. >> crude oil often seen as a barometer of global demand is 86 pntd 22. unbelievable that we werese