impress the markets at this point short of doing anything. draghi just made a comment saying early 2015 means early, not necessarily the next meeting. that could be what the markets are keying off. that does it for us today. join us tomorrow. right now it's time for "squawk on the street." good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. a lot of action in the premarket. retail earnings, jobless claims strong. europe coming off the highs, the ecb, bank of england leaving rates unchanged. draghi saying any specific policy moves are likely a 2015 story. check out the shanghai overnight, up almost 5%. nikkei is about 400 points away from its 2007 high.

our road map begins with the dow within striking distance of 18,000 as jobless claims fall to about eight-year lows. ecb and bank of england hold tight. >> costco comp sales up, walmart downgraded, dollar general missing expectations. >> only hours left in the cbs/dish standoff. >> boath ecb and bank of englan standing pat on interest rates. the bank staff stepped up preparation for further members to combat deflation risks. jobless claims fell last week by 17,000 to 297,000. blue chips within about 88 points of 18,000. i liked the cover of "usa today" as we prepare for the jobs number tomorrow. front page story on how americans are more willing to quit. people quitting their jobs at a rate not seen since 2008.

>> that's confidence. takes a lot of confidence to quit. >> it does. it helps to have health care or know you can get it. that with some of the people who support the aca say that is one thing it would promote mobility in the work force. >> mobility is important. if oil stays here, there are 16 states that are begging for you to come to work. i think that what you have to do is be able to risk it. i think more and more people will risk it. that will bring the price of labor down in those states. obviously drilling budgets will be cut. stay focused on oil. airlines are up today. it's a continual theme. it has to do that the confidence, when i speak with retailers, it's coming from cheaper gasoline. it's amazing. fantastic. >> oklahoma city, $1.99 gas. that got on a lot of the big evening news programs last night. >> i think it's important. you are talking about something, fuel that is cheap not like big

mac, fries and a diet coke. >> we've been watching the higher dollar. the euro is up against the dollar because of the draghi comments which he said it's his intention, not necessarily a target to increase the ec b's balance sheet. and peter saying a $3 trillion balance sheet is no layup, but having an opposite effect of one we've seen lately. yesterday we had a two-year low on the euro versus the dollar which continues to get stronger. dollar index had a five plus year high yesterday. we have to keep remembering. right now the euro is up. >> saw the preview of that last night. the excellent ceo of pvh on "mad money" missed numbers on guidance. i asked him multiple times. he said it is all currency.

when you made your budget, dollar $1.30 now below $1.20. he slashed his guidance. i said 50% of our companies from overseas. you don't know what the dollar is doing. when you see everybody else's earnings coming up, you are going to be blown away. >> meg whitman got me focused talking to her on air and off, as well saying keep an eye on this. we saw it at hp. it's only just beginning. it's both obviously the competition that will come because of the lower dollar from other suppliers and other countries, japan, for example. and then it's simply the headwinds you face on the earnings you earn. >> dow 18,000 to not think about it is a mistake. if you back out the currency, we are doing the same guidance or better. let's see if people are willing to back out currency. >> were they when it was going the other way?

and beneficial wind at your back for the dollar falling all those years? >> is that what it was. >> as the third quarter went on the september and october period were weaker but our gross margins are up 70 basis points. strong control over inventory. inventory is in very good control. we are very happy the way the third quarter ended. getting into the fourth quarter season right now. business is running on plan. we are feeling good about it. >> speaking of retail more broadly, costco u.s. comps up 7% for no 9% when you include impact prices and foreign exchange. walmart downgraded by ubs to neutral. dollar general lower than expected q-3 results. the retailer says it's a pick-up toward the end of the quarter and remains committed to acquiring rival family dollar. the core u.s. number of 9% is the best in four years.

people are saying look out. the gas margins and forex are going to bite. >> don't forget they have apple. i thought costco was a marvell. if people sell it down, they are making a mistake. the walmart downgrade so valuation-oriented. i think analysts have been caught here. they are trying to figure out what manny said, what dollar general said. the last few days have been great. do you downgrade based on the fact that the first two months or october and half of november weren't so good? then $1.99 in oklahoma? i think it's dangerous to downgrade when you start seeing the psychological effect of gasoline going down week after week after week. it's not done. we are going to see $2 pricing. >> right. they try to do the math at ubs and say walmart u.s. sales account for 6.5% of everything

sold in the u.s. if the aggregate savings from lower fuel amounts to $50 billion, you do the margin to consume at 80%, then figure out 6.5%, you get to $2.5 billion. >> a lot of people don't follow price-to-earnings multiple. the stock used to have a great multiple. it's an inexpensive stock. >> it's still 16.4 times. ge used to have a 40 multiple. not to bring that up. >> 9:07 ge mention. >> thank you. >> you know what you do here? you raise eyebrows. i am too old, i have to do it. >> models in consistency have been costco and l brands. almost twice the estimate. victoria's secret up 6%. bed bath and beyond up 11%. >> we've been recommending l

brand for ages. lesley wexner is behind this. one of the things i thought amazing about this is how the street is saying anybody in the mall is hurting. last i looked, those are very much mall stores. this victoria's secret number is incredible. >> i have four jokes i want to say out loud. >> i don't know where to go with that. i appreciate you taking me to the higher-end brand. >> i'm an angel. >> do you have the wings? >> no. i've got that circle. >> do you walk like the models? >> i don't know what you're talking about with. >> part of your pampered lifestyle, i assume? >> while we are considering all that in retail, let's get to steve liesman. >> this is a confusing message.

europe often is. if you look at what's happening to the euro, it really ripped higher. up above 1.24 after falling 1.22 on the beginning of the mario draghi press conference with the european central bank. what happened, very dovish take on it as draghi said policy had now moved from expecting the balance sheet to move to the 2012 level to now being intended. that is a dovish comment. now it's a matter of policy. he then went on that it's not unanimous. germans are not onboard. now you have a hawkish trade. look at the euro. the bund just reversed after rallying up to 73, now it's back to 76. again, this is looking like a hawkish, even though i think draghi has given a very dovish change now. the trouble is this. he's been engaged in what we are

calling quantitative speaking a long time. the market has traded in anticipation of it. maybe now the market is at a point where it's in a show-me state. show me more quantitative easing. when he doesn't do it, maybe that's why you have this euro rally going on. the bund reversing itself, yields are now higher. the bund selling off. it's as we often have here, a mess when it comes to europe. very hard to understand and translate policy. a very big shift from expected to intended. on the other hand, not a lot of belief in that shift on the part of markets. >> the boy who cried wolf, to some extent. thank you. one of our producers call it quantitative speaking. >> that is a terrific way to look at it. i continue to come back to the fact, i have to do it, angel merkel, herbert hoover in a pantsuit remains steadfast.

the president yesterday obviously watches our show. >> i missed what did he say? >> people feel draghi is trying hard and merkel is going against him. it was a sophisticated wrap. people who watch the president recognize he pretty much is on point in terms of what's going on in europe. i enjoyed it. a lot of people feel he is unsophisticated. i particularly have not praised or denigrated the president. >> sounds like he wants this trade deal more than other things. >> totally seems to get what the dynamic is. of course, russia was singled out being not so great. how can you not say that if you're any western leader? >> quickly, you want to update us on cbs/dish? >> i thought we were -- let's do it. 7:00 tonight is when we are going to actually see cbs potentially go dark on dish. it's another fight between the

content producer and distributor. in this case it does appear dish is happy with the deal it has and doesn't want to get it moving. for cbs, they would like to get something done soon. i'm told we are ready to go last week having their team go to denver. nobody was there to negotiate with. apparently charlie ergen's guy was on vacation. if you are a denver broncos' fan, you are not going to be able to watch your team on sunday. >> i used to think that was the security and exchange commission. the s.e.c. can be. there you have another dispute. we'll see how this ends up. remember cbs just crushed time warner cable in its last big dispute. >> does that mean this cowboys/bears game which is an nfl network, do we get that

game? that's a good game. that's the first thursday night game worth watching. >> it will be fun to see romo. >> i hope his back is feeling better. when we met him he did that charm offensive. i no longer hate tony romo. >> even though you want to. >> i want to so bad. he's too great a guy. loves the show. the world's eyes on cape canaveral this morning. we are still waiting for the launch of orion spacecraft. 9:44 eastern is when they would scrub it if they have to. we'll bring you that launch if in fact it happens. taking a look at the premarket. greenline do for you? y just take a closer look. it works how you want to work. with a fidelity investment professional... or managing your investments on your own. helping you find new ways to plan for retirement.

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we are waiting for the launch of nasa's orion spacecraft originally scheduled 7:05 eastern time this morning. has been delayed. jane wells is lucky enough to be there this morning. >> reporter: they are hoping to be lucky enough to get the launch off. window closes 9:44 a.m. eastern this morning. they have to have the problem fixed within about 25 minutes to make lift-off by 9:44. the problem they are currently

working through now, fill and drain valves. including one in the main core rocket there for the liquid oxygen. there was some hiccup in them. they've been trying to pressurize them and get them working again and get these anomalies worked out. if that happens, we should get lift-off today. if it doesn't happen, we'll give it another try tomorrow. back to you. >> jane, thank you very much. if it happens, when it happens, it's a huge step. farther than any manned spacecraft has gone in 40 years. >> have you ever been to the launch? one of the most exciting things i've ever seen. >> i would love it. >> take your kids. it is just incredible. it's the real deal. >> hopefully that happens. we'll get cramer's mad dash as we count down to the opening bell. one look at the premarket. (trader vo) i search.

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things on broadway. let's go from sting to utilities to consolidation. >> i typically do not talk about a small utility like hawaiian electric. it was heavily shorted. people thought it would have a problem. they use a lot of oil. 18% renewables. they can get obviously solar panels, get it cooking away. there is a bank within it american savings bank. this is a short squeeze.

>> a bank within an electric company? >> i know. you get 33.50 plus which is an $8 american savings bank stub. this stock should be up more. the shorts never saw this coming. if we get the rationalization it could be fabulous. >> is that a possibility? >> yes. they are the most green utility. people have been waiting for utilities to go more green as a defense against the solar cities. >> they get a lot of sun. >> i took a trip to hawaii and couldn't believe they are using oil for the bulk of their power generation. you could put a solar hat on and come up fried. >> i don't know if they sell solar hats at sears. they lost less money than people

thought. >> and announced a restructuring. eddie lampert continually said we have all this liquidity. the fact their sales weren't as bad, the fact they are still cutting overhead, the fact that none of us are shopping there. that doesn't matter. maybe the short story is going to be on hold. >> you've got a heavily shorted stock that is heavily controlled between lambert and berkowitz and tisch owns a bunch, too. >> they did lose $548 million. >> they told you they weren't going to do well. >> they keep creating liquidity. >> right. >> long as they are able to stay in business and the banks don't

do anything, they'll stay in business. >> not much more to say than that. >> what about the future for this company? >> my favorite analyst from credit suisse says it's worth nothing. obviously it's worth $35. you've got this disparity between nothing and $35. >> a lot of other retails. we will get to all of them when "squawk on the street" comes back and have that opening bell. friday night, buddy.

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you are watching cnbc "squawk on the street." opening bell in just about four minutes time. a lot going on. dollar/yen hit 1.20 the first time since 2007. that's a target people didn't think would happen this soon. >> no. we are the strongest country. before you freak out and say everything is just what the other guys are doing, we are a magnet for money in this country. you can do a bond deal where you are selling bonds and buying your stock back and saving money

because your dividend is more than your coupon. >> that has been the case for a while. that's been a key story frankly for years now and the willingness of companies obviously to borrow, almost a record year in investment grade. i'm not sure we'll have it this year. >> how much is activist related? people are trying to get their stock price up a lot. this is a great way to do it. >> management teams are thinking about activists, even if they aren't actually there. they are anticipating the possibility of there being an activist so what do i need to do to make sure i don't get one. >> you and i pointed this out. it's an important trend we should focus on. a lot of these activists are going after companies that are performing fairly well. think don't want to go after the companies performing badly because it brings higher risk if they fail. you've got companies doing a

good job finding they're more vulnerable to activists than those doing a bad job. >> i have a speech for the deal part of the street today. all the stocks i recommend as being deal, they are all earnings per share doing better than expected. you used to go after the guys who were awful. >> that is the new play book in activism. >> credit suisse upping procter and gamble saying head winds are out there but they are doing more internally faster than expected. >> i remember when wella was a problem under mcdonald. these were sacred cows, duracell, wella. they are undoing the company the ceo built. proctor price target is big. they obviously hurt by the dollar but they use plastic. raw costs are going down.

if you're worried about the dollar, their numbers aren't that good. it's not done. >> their target goes from 90 to 105 with an up side to 120. >> that stock should be moving more. i'm not leaving the oil theme. that's moving. kroger is the best operator. we had the cfo. kroger quietly has become a natural organic store with within a store. >> the ft wrote a story about with the price of oil declining so much, profits, the big opec nations, especially saudi arabia, petrodollars found their way into so many assets will dry up. they are not there to buy treasuries any more or real

estate any more. >> we get about $600 million a day savings? they've been buyers of real estate. a lot in europe and treasuries. >> what are you going to do, buy italian bonds? >> i don't know. how about italian clothes? >> yes to that. >> infracap and at the nasdaq bed bath and beyond. >> there's a reinventer. they have done phenomenally well. people have been saying it's looking better. they are harmon which is a terrific play to buy your cosmetics or nonpharma.

rite aid pharmaceutical numbers very good. >> you mention the airlines every day. once again delta is up another 3%. >> people should recognize delta is the least impacted by gasoline. they are hedged. american is terrific and southwest. those guys are great operators. the one that is not that good united is getting a little bit better at their job. spirit doing amazingly well. alaska air reported a number yesterday. numbers are explosive for alk. this group remains very undervalued even after the run. american, doug partner has done an incredible job with that merger. >> conversely, oil is getting hit again today. i'm looking at clr, elg and exxonmobil. anadarko. everything is down. >> i thought that move

yesterday, we were saying oil will have another leg down. the saudi comments obviously are not helpful if you are venezuela, nigeria. when are they going to rebel? i guess they sit there and take it. >> maybe they don't have a choice. what do you do? opec comes apart? >> boone pickens does not think it will come apart. let's not outthink this. this is fabulous for so many companies. it's going to make up for a lot of the currency. >> what explains today? you mentioned pvh, guess, aeropostale and express. they are all down almost 10%. >> the mall. the mall is a drag. department stores. macy's didn't say things were great. walmart and target. people take them up because gasoline coming down will help. i don't want to lose this group.

>> you mean aeropostale and guess? >> i hate teen apparel. have you ever shopped with teens? how could you take me to maywell? this is all within the afternoon. >> aeropostale has a market cap close to a billion dollars. >> maybe if they close every store the stock will go up. shrink to grow. now we are going to name a whole annex after jeffries. those stocks, you can't own those stocks. if you want to play it, own deckers which is terrific. that's deckers brand which is uggs. >> disney within a dime of an all-time high takes it to $115. >> how much stock did bob iger

buy during the ebola scare? how much do you think he took in knowing "star wars" is coming? the merchandise is going to be fantastic. i really like that stock here. >> you called it the stock you would buy for your kids. >> yes. that would be my present to my kids. if you want them to understand stocks, you buy some disney. >> i keep going to the keep cvs.com website which is a grassroots effort. >> the dish thing which we will talk about later. on disney, the power of these franchises is incredible. more so "frozen" which came out of nowhere is now a $5 billion, who knows. >> it's not stopping. >> with obviously the products, but also a lot more movies. >> we all know "star wars" when it came out. what happens when new generations get introduced to "star wars"? it's going to be incredible.

you'll go into target and the first ten rose will be "star wars." >> right. that was the idea behind this whole hasbro dreamworks thing. that's never going to happen. >> that was from a "hunger games" deal. >> i'm saying the other guys just don't have it. the penguins from that movie. it didn't do well. i'm not a buyer of any of these short-term guys. disney is a long-term player. lions gate is not a long term player. don't forget fantasy. did you a fabulous piece on fantasy. 90 million names espn has. i dropped williams and picked up

latavius -- i made bad moves in fantasy. the orion mission has been scrubbed today. >> reporter: it's not going to happen today. they are going to scrub today's attempted launch and try again tomorrow morning. they have not been able to fully resolve the issues with the fill-in leak drain valves inside the main rocket boosters, in two of them, at least. as you know, safety is such a huge issue it overrides everything. even though this is an unmanned mission, it was only about six weeks ago when a different rocket exploded after lift-off there. everyone is well aware they want this to go as perfectly as possible. this is a $370 million mission which will launch orion twice around the earth. at one point getting it 3600 miles up. it will test the heat shield and systems before they put humans onboard. again, they will attempt to do it tomorrow morning, same bat

time, same bat channel, we hope. if they can get everything today worked out. they plan to do a 24-hour recycle of these systems they have and attempt another launch tomorrow morning. back to you. >> thank you for that. we'll try that tomorrow. meantime, dow is down about 35 points. bob pisani on the floor. >> we had one heck of a night in shanghai. another new high. money has been pouring into mainland china ever since they started opening up investments. take a look at the shanghai index, 4% increase. look at that. we've gone through the roof. no specific reasons. they've been surging for months as we have additional ways to invest in china. central bank talking about stimulus program. shanghai up about 37% this year. chinese energy names surging. petrochi

petrochina, both trading in the united states. can we get more confused from mr. draghi? european stocks all over the place. we weakened initially in the european market. you see in germany euro shot higher. draghi talking about reassessing the current plans in the first quarter, implying any plans to purchase sovereign debt might be put off. then discussing buying up a assets except gold. gold dropped. gold though when they discussed buying everything except gold, gold dropped immediately there. a lot of confusion. draghi seems to be all over the place. let's move on, talk about retail earnings here. the main thing, guidance has been skewed heavy negative. a lot of companies lowered guidance. guess has, express has,

aeropostale has, pacific sunwear. abercrombie and fitch did the other day. the problem is the margins are under pressure. there is no budge in the fashion cycle. consumers are spending elsewhere. david had a great interview monday with berman capital. apple, amazon, samsung are taking huge amounts of money out of the wallets of consumers. it isn't all bad. we don't pay attention to the monthly retail numbers. l brands and cato had very good numbers. l brands up 8%. cato up 7% respectively. walmart, ubs downgrade was interesting. there are a lot of companies out there dramatically overbought. this is a problem with a lot of stocks. traders have been arguing cheap gas will help the discounters. look what these discounters have done in the last quarter. cheap gas is priced into the stocks of all these companies.

dollar tree, ross stores, target. this is in the last two months these stocks are up 20%, 17%, 11% here. big pharma stocks like biotech names are significantly up in the last few days. significantly above their 50 day moving average. the xle, two days on the up side with the energy stocks moved to the down side today. hoping for a third day of rallies. that is not happening as energy stays to the down side. we are down 27 points in the dow. back to you. >> thanks, bob pisani. we talked a bit about it earlier. always fun to focus on these battles between the distributors and content providers. in this case, another potential shutdown nearing with cbs and dish unable to negotiate a new deal under which dish would carry the cbs network.

they set a 7:00 p.m. deadline to go dark on dish's 20 million subscribers. not the first time cbs found itself in this position. most famously 1 1/2 years ago when it battled with time warner cable. time warner cable lost having suffered significant subscriber defecti defections. football seems to be one of the key weapons here. i talked to john malone and we talked about the bundle you pay in programming. sports is the key to that bundle. it would be the key to many of these disputes. the nfl games that will come up on sunday, including the denver broncos on cbs being a key puzzle to get dish to say come to the table. they haven't been talking. cbs sent a team to denver but their key negotiator wasn't

there. charlie ergen who controls dish focused on the spectrum auctions. they eclipsed $40 billion lately. spoke to lesley moonves a few weeks back and asked him what is going to happen with this fight with dish? >> we have said to them, look, we don't want to be dark, but we want to be paid appropriately for our content. we have proven we are not afraid to fight. we would rather not. i would rather be a lover than a fighter. >> wouldn't we all? >> the key themes when it comes to many of these companies is not whether they are on or off the air, but fewer people are watching them. ratings are down and advertising, particularly in the scatter market seems to be weak. cbs had a great year last year. this year it has been down. viacom controlled by national

asu amusements has been down this year. cbs the most open to it at this point. discovery. that's been one of the key themes here. when it comes to cbs, apropos nothing except an earlier conversation about disney, there's been a lot of speculation about starz, would it be sold? cbs has no interest. they definitively indicated they will not be a buyer. >> can't miss football. people are going to be very angry. honestly. i have the package. >> i think in denver, the last bronco game got a 47 share. almost half the televisions on were watching that game. >> not tolerable to miss football. still when talking about

franchises, you don't mess with football. >> that was the key for them. it was over the summer. when it came to football season, why anybody would have wanted to watch it -- last year the jets won a few games. >> this is going to be ugly. >> charlie ergen is feeling good. he has a contract he would love to keep and watch the value of his company creep up all the time. >> is he a happy guy? does he enjoy the wealth? >> yes. i think he is happy. >> no problems with the wealth. >> i think he's good. >> we worry about him a lot. >> let's head to rick santelli in chicago. >> you know, the euro did a big u-turn. we could debate why. the ecb are mirroring ours.

at the end of the day it's simple. the notion of which test tubes to use and who is going to pay for them is at issue. if you think they can pull this off without germany, they probably can with respect to quantitative easing. the key in the market is looking only the facts and the facts are there is no more certainty about qe or some of these programs now than there was yesterday. look at the euro. i want you to look at the next two. forget where the center line is of unchanged. look at patterns. you see the euro u-turn. bund, same pattern. same could be true for our 10s. ours move to unchange. if you open the chart up to further back than our normal chart of the beginning of november. let's go to mid august. on the far left you see all those bottoms around mid 2.30%.

you see the 20 sessions between 2.30% and 2.38%. we continue to hold underneath those levels. if we look at the spreads and yield curve, this is very important. they continue to have passes at historic flattening. if we look at 5s to 10s, it's hovering at 6.7. both comp back to january '09. we want to pay attention to 10 versus bund. 1.50 is the magic number. we go to 1.46, 1.50 is the level. it's the growth in the different economies and how it plays out with our sovereigns and their sovereigns. back to you. >> thanks so much, rick santelli. starbucks upping the ante.

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stopping at the register. mobile order and pay is rolling out in portland. you can order on your device, pick it up at the store.

you cut out the transaction at the store completely. company says it expects to roll out city by city next year. a lot of comments about how they are navigating holiday season fairly well. >> howard schultz, the ceo, charitable trust name, has a beautiful new roastery opening up. there is a lot of great action. the deal is when i get this i have to pay for whatever. i would press a button and it would pay for everything, i pick it up. they are outdoing everyone else in technology. starbucks figured out mobile ahead of everybody else. it does matter. the lines are long. they have. schultz is a brilliant man on this stuff. >> that's going to be an all-time high today at $81.51. >> that is. i follow the company closely. the roastery is very exciting they are announcing. >> what is that?

>> it's like a cathedral of coffee. i always viewed starbucks as being a secular temple of study and now it's a cathedral, too. i congratulate them for doing an amazing job. >> gas prices down, employment up. >> the triple cappuccino is called the cramer. it has three shots of espresso. >> we'll get stop trading with jim. not stop talking, but stop trading. this is a burrito made with chocolate, soybeans, and apricots. what kind of chef comes up with this? a chef working with ibm watson, on the cloud. ingredients are just data.

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we're for an opens you internet for all.sing. we're for creating more innovation and competition. we're for net neutrality protection.

now, here's some news you may find even more surprising. we're comcast. the only isp legally bound by full net neutrality rules. time for cramer and stop trading. >> i want to talk about avago. he says the quarter is amazing. revenue driven largely by-product ramp of new smart phone generation at large oem. you are not allowed to say the name of apple. i think it's hysterical they are not allowed to mention apple, but that's driving the stock.

avago is a great story. >> clf has been falling now. you've been following this. i've been following this. >> they pulled the tender offer notes. this is an iron ore company. you have to pay people to take on iron ore. it's the worst. i've been mentioning this. it's one of the worst stocks i've ever seen that is an iron ore company. this is a suicide pact to produce iron ore endlessly and they've driven the price down. brutal. >> bad side of activism. >> "mad money" tonight? >> i've been focused on oil. now i focus on autos and auto. this is a small company. i try to feature companies people don't know. trk is an exciting company doing

quite well. it's web-based solutions and surfaces. automotive is on fire. automotive is the best. >> we'll see you tonight. >> you bet. thank you. >> 6:00 p.m. eastern time. when we come back, the latest on the sony north korea hacking controversy. rick sherlund racing his target on microsoft which is the best performing dow component right now. i'm only in my 60's. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my options. then i got a medicare supplement insurance plan.

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♪ good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, simon hobbs and david faber. dow being dragged down by a few components. nasdaq continuing to hold up. oil taking energy names out, as well. draghi saying qe in europe is a

next year's story. >> stops backing away from record levels after the ecb and bank of england leave rates unchanged. >> walmart hit with a downgrade. dollar general misses expectations. costco reporting a rising comp sales. >> investigators blaming north korea for hacking sony pictures. north korea denying any involvement. what implications a hack like this holds for the u.s. >> a reminder rick sherlund will weigh in on microsoft today in the wake of yesterday's shareholder meeting. he is raising his target to $56 from $50. he'll tell us why he still likes it so much. >> first let's get to retail. dollar general missing while costco comp store sales up 7% for november and up 9% when you exclude the impact of gasoline prices and foreign exchange. joining us before he jumps on the conference call for dollar general is chuck grom. it's a soup of retail news. let's start with the call you are about to get on. dollar general wants to buy

family dollar. is that deal going to happen? >> we think it continues. we are going to get news from both dollar tree over the next ten days ahead of the 23rd vote. we do think dg will win because their balance sheet is more superior. they've got the buying power to buy family dollar. we think it will happen. >> will they close something like 4,000 stores? could they raise their bid? >> we think the number is close to 2,500 stores. we think the 4,000 store number is too high. i think it's possible they raise that bid to the $82 to $84. we'll get some clarity. not on the call but over the next ten days. >> you cover costco, as well. those impressive comps continue to come in. who are they taking market share from? how are they doing better than a lot of the other retailers that cater to the same kind of consumer struggling recently?

>> well, it goes back to what costco has been doing for 30 years. they remain tight on price. they cap their margins. consumers get deals. obviously you pay to shop at costco. people like the benefit from that. at the end of the day i think they are gaining share from sam's club. if you look at the core comp and delta between costco and sam's, it's never been as high as today. they are gaining share on the organic side from some of the bigger organic players such as whole foods and fresh market. the results today were phenomenal 8% with over 5% traffic. you just don't see the consistency in retail they are delivering every day. >> it's an amazing story. people are worried about gas margins. why wouldn't you sell it after a nice ride? >> i think there is no better model in retail, to be honest with you. with the balance sheet they've

got, store ownership, annuity-like stream. i think decline in gas prices for them will be very beneficial to margins for them over the next couple of quarters. you saw that with kroger today. there's no reason to sell that stock at this level. >> on the gas theme here, you cover costco to the dollar stores to kohl's and macy's. are all these names going to be beneficiaries of the cheaper gas prices below $2 a gallon prices we are seeing at the pump? how many has been priced into these stocks? 2. >> if you look at walmart and target at these levels trading at 17, 18 times, there is some good news and optimism priced in. i think that the clear beneficiaries will be the lower income customer. the customer that lives paycheck to paycheck will see a benefit from those gas prices. particularly if you get into that $2 level you have to think

psychologically almost every consumer demographic will feel it, in my opinion. >> can i ask you about health care costs? anecdotally, a lot of people i know, people you wouldn't expect are paying more for health care. they are very dissatisfied. presumably that would stretch to a large number of people across the country and might explain why the gas prices aren't feeding through to retail sales as you might hope. >> i wanted to say that when you look historically back and look at correlations between real consumer spending and gas prices, there is no statistical relevance. it is hard to see. sometimes there is a lag. sometimes gas prices retreating will get caught up in health care and other items. i think you've seen improvement here in business for a lot of these companies. dg calling up improvement almost 5% quarter-to-date in their business. it's not a one for one correlation. >> give us a quick rapid update

on the holiday season. so far the numbers don't look as strong as last year. a lot of caution overnight here. abercrombie cutting their outlook. is this a reflection of the last quarter of retailer? >> i think pbh said black friday weekend was mixed with a good start and weaker finish. reality is consumer is still under a lot of duress and certainly from our promotional standpoint everybody and their brother is doing black friday specials recently. it's competitive. i don't think we are smooth sailing yet. you have to look into the front half of next year with gas prices where they are. the winter is supposed to be warmer so heating bills should be lower. there are reasons to be optimistic. the question earlier was a good one. how much of this is priced in? there's been big moves in

retail. clearly some of this is baked in. >> we'll let you hop on that dollar general call. chuck grom analyst for retail at sterne agee. let's get some analysis. when do you think we get 18,000 on the dow? >> markets have been supported by strong underlying dividend growth. we are hitting new all-time highs. we had a fifth consecutive year of double-digit growth. i like undermentals of strength in the stock. another company raised their dividends. that is a positive healthy support for the market.

it's setting up for years to come. >> more importantly, goldman sachs is talking about $110, $120 billion stock being bought back by companies. are you surprised at the market in this environment isn't rising more rapidly? >> the market's already have a great year and has been doing quite well. worked its way through a lot of negative news earlier in the fall. i think the basic back drop is still good. you have a better growth picture. you've got no inflation. oil short run may hurt the markets a bit because there are so many energy companies in the big indexes. as we go forward, we start to see the benefits, the consumer and the economy. i think the oil story is ultimately good for the equity market. >> obviously a lot of your products are focused internationally. some people have been distracted they didn't get qe from the european central bank.

that was never going to happen at this meeting, for those of us who watch it. it might be january or as late as march. isn't the danger when they start that they get how much are you buying, is that enough to support markets? what will it do for the european economy? is it too late? that's the biggest risk, isn't it? >> there are a few different questions. i agree with with you. people didn't expect the ecb to take more kofrn qe purchases this time. bigger question when you're investing internationally, do you want to be exposed to the currency. investors historically always take this currency risk. with the transition from the fed towards raising, we don't know how soon and how much. the fed is on the path toward raising. ecb, bank of japan are on the path toward easing. all these moves make the currency unpredictable. if you are going to invest in europe, think about the stocks.

>> i understand your product bes strip out the effects of the euro. i'm asking something different. when qe starts, could it be a turning point for people losing confidence in it? not just in europe but potentially in japan? >> there's always a divergence between the economy and stocks you are investing in. stocks are not the economy. look at their profits and their dividends and what happens in the economy is a different question. if you look at japan is a prime case study. the last 20 years, gdp growth has been negative. profits are up 8%. if the euro keeps weakening, that is going to support european profits and make it a better investment opportunity. it is a critical piece of what the currencies do tie back to both markets. >> bill gross put out his latest investment outlook for janus. he is writing about this team whether central banks can pile

on more debt to solve debt crises. he goes into his actual investment tips and says markets are reaching the point of low return and diminishing liquidity and prepare for a world where asset appreciation is engineered upon false central bank premise of artificial yields. do you agree? >> no. look what's been accomplished. the fed did aggressive qe. it made dramatic improvement in balance sheets in the united states. they fixed the banking system, housing market, household balance sheets where people have been able to refinance at low interest rates. qe has not generated strong growth but caused healing in the economy. what europe is trying to do and what japan is trying to do makes sense. they are trying to repeat what the fed's done. i'm not sure it will succeed as well as the fed because they are both moving much too late.

it is the right thing to do. the fed policy is a success. that is why we are seeing 200,000 plus payroll jobs. the fed's gotten us past this deleveraging recovery. >> that is the point. is it too late in europe? ethan, jeremy, thank you for your time. >> thank you. home prices getting a boost. will the trend continue into 2015? what the new year has in store for the housing market. twhat do i do?. you need to catch the 4:10 huh? the equipment tracking system will get you to the loading dock. ♪ there should be a truck leaving now. i got it. now jump off the bridge. what? in 3...2...1... are you kidding me? go. right on time.

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you are watching "squawk on the street." barnes and noble is moving lower sharply. posting weaker than expected second quarter results. said it's buying back microsoft's stake in its nook e-reader. the move provides a clearer path toward the potential split of its businesses. barnes and noble down 13% so far today. >> thank you very much. home prices have been on the rise. what does 2015 have in store for the housing market? diana olick is live in new york

at the housing conference. >> good morning. a fascinating discussion by some of the nation's top housing economists. everyone wants to know where are home prices headed in 2015? the bulk believe they will be flat to slightly higher for the year. here we are at the home of the s&p case-shiller home price indices. they disgreed. robert shiller believe home prices will be flat to slightly higher. david glitzer believes there is a possibility home prices nationally could fall on an annual basis next year. this isn't necessarily a bad thing because remember, price appreciation is keeping a lot of people sidelined. it's not because of lack of demand but because of tight supply that will keep those prices inflated. they say the home builders need to step up. where do they need to build? no more in the suburbs and exburbs. one interesting point they made

is multifamily housing, despite how much new supply we've seen come on the market, is not overheated. they believe there will continue to be rental demand and it will be strong in 2015. not because of home prices but simple home buyer economics. >> that goes back to the stagnation in incomes. that's the core problem that we face as a country. you can't underwrite your way out of a stagnating income issue. >> it was interesting to hear they do not believe credit is the problem standing in the way of so many young home buyers. most did not believe credit is overly tight. instead, they feel it's millennials, which are a different generation who have different feelings about the homeownership. they do believe millennials will begin to come into the housing market toward the end of 2015. some said they are staying out but they believe it will become too expensive to rent and these

millennials will come back into the market. the final quote, housing is no longer about location, location, location, it's about data, data, data. today's generation is watching every move in this market. if you want more data, we've got it online. check out our home price map on cnbc.com to see real teamtime moves in home price necessary 2015. >> thank you very much. up next, north korea denying it had anything to do with the hacking of sony pictures in hollywood. investigators say that it is responsible. what would the implications of this breach be from the reclusive nation?

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sony close to announcing it was north korea that hacked their studio, released movies, studio salaries. subsequently sony was quick to deny it as did north korea. in the bbc, they've been more coy saying i advise you to wait and see. arik broke that story. he joins us. you put the cats amongst the pigeons. where do we stand now? >> we are standing by the story. early indications when we said a

statement would come today, that didn't happen. we are standing by the story. north korean theory is still very much alive, still strongly according to our stories. it is a very sophisticated attack. there have been reports about a possible internal employee. i wouldn't necessarily rule that out either. i don't think you can rule anything out. the north korean connection is alive partially because the malware seen is sophisticated. >> the issue with north korea is the film "the interview" starring seth rogen. we have the salary for those guys leaked overnight including the credit card number of the head of the studio. it begs the question, do they have this technology to so easily go into a company? and would that company tell the truth? if you're sitting in sony

pictures at the moment, trying to keep the staff together, everybody knows everybody else's salary level and now you are told you could be the target of north korea, would you go out and release the facts as you saw them? >> it's entirely possible they won't. this has been embarrassing for sony on so many levels. partially because of the technology company and would have protected its systems better. and the sensitive data. salaries, contract negotiations and movies so far. there have been so many crown jewels. part of the reason sony came out to implicate a particular suspect is for fear of agitating the mark. >> do you think we are going to find out? going back to home depot, target, huge stories, although the hackers were never really quite identified. >> no one has been identified in those breaches. there have been instances.

the case in point, china. china's army was caught by a firm to hacking google, intel, numerous other american investment companies. there's always a level of plausible deniability. might be a third party gang. there's always a level of plausible did eniability. >> is this different? they went more and wreaked havoc, twitter feeds of different employees and on the websites. we didn't see that stuff. we saw data gathering. >> in home depot and target we saw financial motive. that was all about getting access to payment instrument. not a lot of financial motives here. maybe we saw some credit cards and social security numbers, but

it's actually doing damage to sony. who has motive? could it be a disgruntled employee? absolutely. north korea with its very public grievance about this film? absolutely. >> this is entertaining because everybody loves to gossip about movie stars and see the boot legs that are online. the issue for people watching at home is whether the strategic assets of this country are also as easy to be penetrated by the north koreans, whether it's the utilities or elements of the defense system, whether it's the facilities around this country. >> we do absolutely have a problem with this in this country. this country, the united states, is actually very good at using cyber weapons to attack its adversaries. looks no further than iran, the reagan malware announced by

symantec a couple of weeks ago. the u.s. and supposedly british is the theory. we are very good at that. it only proves these things can be done by a motivated, well-financed state. we have to think long and hard. once you think they are protected, they are not. security is an ongoing process. it's not a moment you say you are secure. you have to continually improve it. >> keep us posted, arik. straight ahead, rick sherlund raising his 2015 target for microsoft after yesterday's meeting. why he is still bullish. (vo) rush hour around here

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now, here's some news you may find even more surprising. we're comcast. the only isp legally bound by full net neutrality rules. welcome back to "squawk on the street." i'm jackie deangelis from the nymex. we are waiting on the department of energy's report on natural gas storage here. we've got a withdrawal 40 billion cubic feet. the reason we've seen prices go lower is because this is less of a withdrawal than we saw last year and less than the five-year average. especially this time of year when temperatures are going down. cold temperatures didn't last in parts of the country. we are seeing selling pressure

here. this is good news for consumers with nat gas under $4, $3.69. add that to the fact the average gas price across the country is $2.72. this is going to give people extra money to spend in other parts of the economy. back to you. >> keeps moving lower. here are the stories we are watching. kroger among the biggest gainers on the s&p 500 up 3%. the supermarket chain raising full year guidance and beating the street with third quarter earnings. average rate on the 30-year fixed mortgage rate fell last week to 3.89%. it's the lowest level since may 2013. both ecb and bank of england standing pat on interest rates. that certainly gives the markets a lot to chew on after draghi's comments. >> let's be transparent. they indicated they are about to

embark on sovereign ge. steve liesman, some people were disappointed they didn't get more today. i think a lot of people in the market knew nothing was in the offing for this meeting. >> it's all what he said. i'm calling it a confusing press conference from mario draghi. you can see in the markets at first. weakened the euro then strengthened it. i'll go through it in details here. draghi said increasing the size of balance sheet now a matter of policy. rather than expecting to add in euros, the government expects to add it. they said they would consider qe toward the end of the first quarter. some doves hoped for a qe decision as early as january. not done yet. draghi says ecb would act

without uniamity. >> it's an important policy measure. it can be designed to have consensus. i'm still confident, but we have to remember we have a mandate. as i said before, we don't tolerate prolonged deviations from our mandate. >> then asked if buying sovereign bonds was illegal he said not buying the bonds could be illegal. >> qe program, which could include sovereign bonds falls within our mandate or better. is an eligible instrument we could use in pursue of our mandate. not to pursue our mandate would be legal.

>> here is my take for what it's worth. this is another incremental move towards qe. the market is tired of european increme incrementalism but is accustomed to it. they will do so without the germans. it's not as fast as some on one side of the trade hoped. i would say that is high sierra macho central banking, we don't need no stinking unanimity. >> i think you see him trying to speak on the whole governing council which is split. it's a very different situation from when he spoke on his own behalf recently and said we should try to raise rate expectations rapidly. you must remember also, the european court of justice is going to rule whether sovereign qe is legal at the start of january. that's why they won't do it now. they'll wait for that judgment. you might get it january 22nd if

the germans are onboard. if not the rest will push forward with a majority probably in march. >> you said split. are you saying it's an even split? that is not my read. there are those who disagree. i think he has a majority. when you went from expected to intended, it shows he has a majority onboard to raise the balance to make that policy. split is maybe overstating the disagreement on the ecb right n now. >> it's very important. every time he speaks they keep battle in public. it's an important split. it contributes the most into the central bank. that is where the biggest part of sovereign bund buying will be. >> i get that. what is your read when he said we don't need no stinking

unanimity. he says he which is going to do whether whether or not they have them. we looked it up. this is a stronger statement or the strongest statement he has made to date on acting without uniamount. this is something the market expects. >> virtually every major investment bank believes there will be sovereign qe. >> i think you're too busy concentrating on the words. >> i think concentrating on the words is what you do when you're trying to figure this out. >> maybe, steve. >> that was interesting to watch.

microsoft stock has been on the tear since nadella took the reins in february. rick sherlund raised his target on microsoft. to $56, is that right? you are getting close to 2000 levels. >> the stock is selling at about a market multiple on calendar '15 on earnings, but they have $66 billion net cash. if we look at the stock ex the cash. look at the enterprise value to free cash flow. it's about 12 times. it's one of the lower multiples of all the big cap, not just tech, but broader big cap names. we like the stock. we think the next big issue will be what does this new board do with the cash? having already addressed the issue over the past year of new ceo and how do we change the strategy to move more aggressively to the cloud, the most pressing issue for the

board now will be what do we do with all this cash? that should be positive for the stock. >> that said, we had this discussion before. what makes you think we are getting closer to it now? >> you've got ballmer's no longer on the board. you have five new board members. the composition of the board and the priorities of the board, you've gone through a number of the more pressing issues. this issue is probably front burner now. management acknowledges the board gets it. this is high on shareholders' agenda. shareholders are having a bigger say in the company. this is probably over the next quarter or so something that comes up. you could see a very extreme outcome, probably highly unlikely you do a leveraged recap. microsoft could buy back half the stock. credit markets don't have capacity to handle $200 billion

of debt. highly unlikely bill gates would approve something like that. you could buy 5% or 10% and do that every year. that is enhancing to earnings would be nicely enhancing to the share price, as well. >> shares are up 48% since ballmer announced the regulars initial. the more we look back on this, it's striking what a drag he appeared to be on the name. was that it or was it that they hadn't put cloud together? maybe he was the one behind putting cloud together. what was it? >> i think that was a big part of it. pcs have become more stable now. they were declining a year ago. 20% a year. the company is now the biggest cloud company in the industry as offices move to office 365. it's still small at 6% revenue, but with almost $6 billion revenues, they are bigger than anybody in the cloud now.

over the next four years it could be half their business. that's multiple enhancing. it shows the company's been able to transition to the cloud. i think that will be positive for the stock. that is going to take several more years. >> do you agree with shareholders sasha nardella deserves a his pay package? >> i don't think that should be a one-year compensation number. that's getting position for the next three to five years. i wouldn't suggest that is his one-year compensation. >> i like the mistaken "new york times" headline that he was being paid $84 billion. >> that would be something. >> that would have elicited debate about executive comp. >> the company is on the right track under his guidance to move much more aggressively the cloud. the cloud will change the i.t.

industry over the next couple of years. he is doing the right things. it may not feel good at first because you are cannibalizing some businesses, supporting competitors. in the new world, you've got to move aggressively the cloud. that is the pivot we've seen at microsoft. also there's some things happening in the business that probably gives us up side to earnings over the next year. xbox, we think they lose $1 billion each year. but it could turn profitable. the nokia business cost structure will be lower wean thought. no one likes the revenue there. the cost structure is probably going to come down more. >> as a footnote, a lot of people's take away from the shareholder's meeting yesterday in addition to the stuff you're talking about, the financial dynamics, jesse jackson sat in

the row next to steve ballmer and there is a commitment to increase representation of people in color and women in microsoft. that is a great thing. is there a danger it gets overly politicalized? >> after satya's comments a couple of months ago about women, you wondered who will answer this question. i think they did a good job addressing that issue. the shareholders meeting is typically not terribly stock-impacting. there are a lot of social issues that come up. as far as the stock goes, the meeting was a nonevent. what was important to me, you've got a newer board here. now i think that agenda can move forward to do things to help improve shareholder value. >> you made noise today. best performer on the dow. thanks. see you soon. >> thanks. >> rick sherlund.

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what a difference 24 hours makes. take a look at the energy sector. deep in the red today after yesterday's gains. dom chu has more. >> down by about 1.5%. energy stocks are taking a hit as oil prices continue to fall. among leading laggards, pioneer natural, national oil well, transocean. one of the sectors in terms of the loss is another sector's gain. airlines soaring. all showing strong gains. that inverse relationship between oil and jets takes hold

again today. >> we've seen it a lot lately. >> let's get to rick santelli with the santelli exchange and the euro at session highs. >> we have to start there, of course. we can debate all the words mario draghi is using or disappointment in the marketplace. there is a real issue here we were discussing off camera. >> the germans. the germans are not willing to go along with ecb idea of quantitative easing. the big issue the market is starting to understand, germans are not onboard. draghi said he might not have an announcement in january, it will be a while before he gets them onboard. >> here is what everybody is debating. mario draghi said i don't need unanimous support. i just need plurality. that may be true. i harken back to the affordable care act.

no republicans were onboard. it's been a disaster. even if they do quantitative easing american style, if germans aren't onboard there is a heap of potential issues that crop up over time that are unforeseen at that point. >> completely agree. it's all about the germans. that is a statement of fact he only needs plurality. politically he needs the germans. read what's written in german press about qe. there is more pushback. >> it isn't only the bund mentality. i think a big chunk of the german population is getting fed up. there will be elections and a price to pay. >> absolutely. it's unpopular among the bunds bank and among the german population. >> merkel is walking a tough one. you don't want to destabilize the market. so far words are working. everybody is like let this thing

fester in its own way. >> i think the market will give them to the end of the first quarter. they have to give them qe by the end of the first quarter or lose confidence it will ever come. >> my theme today is status quo. there is no such thing in the world as status quo whether talking about climate change or energy. change is the status quo. what are your thoughts dropping energy prices with special consideration to capex? is it a bad thing? is it going to shrink gdp? are the energy wildcatters have all their paper blow up? summarize in 50 seconds. >> big picture, it's just a transfer. the energy producers are losing money. energy consumers are going to gain money. net/net it's largely a wash worldwide. going from one pocket to the other. >> it's nice the middle class on down will get some consideration. everything that has been a success has helped only the super wealthy with access to

credit. >> absolutely. the drop in gas price is progressive for the u.s. it helps the lower income people. they get cheaper gas prices and stimulative early. you're right that later on it is going to be the a bit of a drag on the energy issue. we are having a liquidation trade right now. no one thought o four months ago it was $107, this was going to happen. it's caught a lot of people by surprise and we've had a big liquidation. >> three steps forward, one back is the wmarkets worth. >> when we come back, na nasa's orion launch called off. a weather issues and fuel drain valve issue causing problems. what happens now? jane wells will give us a the report after the break. [ male announcer ] some come here

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thank you. ordering chinese food is a very predictable experience. i order b14. i get b14. no surprises. buying business internet, on the other hand, can be a roller coaster white knuckle thrill ride. you're promised one speed. but do you consistently get it? you do with comcast business. and often even more. it's reliable. just like kung pao fish. thank you, ping. reliably fast internet starts at $89.95 a month. comcast business. built for business. nasa scrubbing the launch for orion's test flight this

morning. jane wells is live in cape canaveral. the question is what happens now? >> well we try again if they can figure out what the problem here was and solve it. there is so much riding on orion carl. billions of dollars in development. 1200 sensors. a new heat shield. now cry awe board. no parachutes. none of that can be tested unless it gets off the ground and that didn't happen today. >> at this time we recommend we scrub for today's operation based on the issues we are working. so please set up for a 24 hour recycle and we'll let engineering reevaluate our configuration. >> the rocket scientists literally were having trouble to getting some of the valves and boosters to work properly. and. and people are all too familiar with what happened with the

orbital sciences rocket in october so you want to make sure the boosters are working. winds, and a because a boat wanderwan wandered too close. one reason the launch when it was closed at 9:44 a.m. is because mission directors didn't want it landed past 2:15 p.m. because it will take the navy about six hours to recover and if you wait too long it is going to get dark and they don't want that happening. hock heed martin is the lead on this. and they will try again tomorrow morning. >> now to jon fortt with a look at what's coming up next on "squawk alley.." >> lots to talk about. mark zuckerberg speaking about not just connecting the world but also about tim cook's comments that the advertising business models aren't in line

with consumers. also baezos speaks. and finally the company doing police cameras in the wake of the controversial grand jury decision not to prosecute the officer who was involved in his death earlier this year. more coming up on "squawk alley." em

♪ you don't need to think about the energy that makes our lives possible. because we do. we're exxonmobil and powering the world responsibly is our job. because boiling an egg... isn't as simple as just boiling an egg. life takes energy. energy lives here.

we are just one day away from the big jobs report and that means you still have time to nail the number. tweet your predictions for the november non farm payrolls report at squawk street. use #nail the winner. simon is holding up your prize. it is a cnbc 25 commemorative book with all the cnbc 25 in there and autographed by all of us here on the squawk on the street team. you will have one minute until the jobs report is released to tweet your predictions predictions@squawkalley street. >> good morning it is 8:00 a.m.

in facebook headquarters, 11:00 a.m. here on wall street. and "squawk alley" is live. and welcome to "squawk alley." joining us, what a treed. haney nada is here. and a lot of other investors owe. jon fortt, kayla tausche with us as well. dow down about 82 points as energy pulls a lot of components lower. we want to approach the end of the year with