"squawk alley" is live. ♪ ♪ ♪ welcome to "squawk alley." that song, of course, a nod to the announced cast of an all female "ghost busters" staring kristen and melissa. no word on the casting of zooul yet. however our cast is the same this morning, jon fortt, kayla tausche here at post nine on a day where the markets have lost momentum even though we got a nice start with the likes of apple and boeing. apple, shares are still positive, soaring after fourth quarter earnings absolutely crushed expectations. the company sold more than 7 4

million iphones in that time hosting the largest profit in corporate history. josh lipton talked to tim cook and he's live in san jose this morning. >> apple stunned wall street and investors with those latest results. the big number in that report as you mentioned, apple shipping over 74 million iphones. that is way more than the street expected and it sold those phones at higher prices. the average at 687 was the highest ever according to ptig. the results for the flagship product helped soften the blow of another disappointing quarter for ipads. apple shipped 21 million ipads a drop of 20% and when i spoke to apple's ceo tim cook he said there could be some in his words can ballization taking place between the mac on one end and the phone on the other. also cook did point out the ipad sales number is better than it looks because apple didn't increase inventories this much

as last year. more importantly over the long term cook making it clear to me he is an ipad bull and told me customer use of the product was in his words off the charts. and he talked about conference call with analysts about the partnership with ibm as apple works to push the ipad harder into the enterprise. >> i think the partnership with ibm and the work that we have going on in the enterprise is profound. i think we're really going to change the way people work. i'm excited about the apps that are coming out and how fast that -- the partnership is getting up and running. >> now by the way, cook hinted at a final reason for optimism saying that he knows what's in that ipad pipeline and in his words he feels very, very good about what's coming. carl, back to you. >> all right. she nice. thanks so much, josh. josh lipton in san jose on the apple quarter. for more let's bring in analyst

jeffrey to talk about what went right mostly and the few things that did go wrong. your thoughts on the overall phone strength, the margin strength and how long that could last? >> it was an amazing quarter. i think we had some inkling volumes would be good but the asps setting prices on the gross margins were incredibly strong. obviously apple tends to have strong first quarters after launching a phone and the guidance implies a sizable drop in the march quarter so what we are sort of struggling with a little bit right now how much of this incredible growth was driven by existing iphones users finally getting the chance to upgrade to a nice big iphone versus maybe market share gains at the expense of android which would sustain that growth over multiple years. the concern would be if it's just iphone upgraders maybe december 15 will be a slightly difficult comp in terms of thriving growth. >> tim cook said that apple is stealing androids users at the highest rate ever. at least over the three years that they've tracked it. so there's a little bit of color

on that. going back to the ipad issue, he said 50% of ipad buyers in the u.s. are new to the ipad. 70% in china. that suggests to me the main things that people are doing with the ipad just aren't being performance challenged. in other words, if i want to do the cool latest stuff with the ipad i don't need a new one. do you think that software innovative software, that taxes the performance of these devices maybe what will drive the upgrade cycle into the future? >> i think in ipads in particular it's still somewhat stuck between a smartphone and laptop replacement. i would love to see an ipad be a true laptop replacement for most enterprises. so having proper multitasking, two apps open at the same time next to each other and the enterprise connectivity that cook was talking about working with ibm on. at the moment it feels like it's a great couch surfing tool, typing device but hasn't gone on to fully cannibalize your laptop

usage case. from the ipad i'm not sure when that could pick up. i suspect if it does it will be apple that drives any turnaround. in the meantime iphone 6 pluses which compensates quite a significant degree. >> stewart, then apple pay which many were hoping we would see a glimpse of growth, at least as people start to get the iphone 6 and the capability. tim cook said 2015 is the year of apple pay but services revenue that captures any sort of sales they're getting from apple pay was only up 4%. wouldn't seem that's a meaningful revenue stream yet. what's your outlook there? >> yeah. the iphone was still 75% of total revenue so the other businesses are still relatively small in total and i think apple pay requires people to have the sense, the technology in their phone and buy the iphone 6 or 5s, point of sale to be upgraded and that's a process involved in doing that and then needs to be

widely available so you don't thinks twice about using apple pay. for 2015 cook is right in talking about this being an important year for getting the footprint set up. in terms of revenues flowing i suspect 2017 might be a more reasonable year to expect something that might meaningfully impact earnings for apple. >> finally on the watch, some of these battery concerns have people thinking the first iteration will not set the world on fire, others saying look how often underestimating apples has gotten you into trouble. >> i'm not sure the apple watch initially addresses all the requirements people have. it's like a smartphone in your pocket. and op your wrist it's almost too feature rich. it will take a few generations to mature. the counter argument look at ipad people didn't know why they wanted the ipad they just wanted it. only now you see ipad volumes starting to decline as people scratch their heads going what am i using my ipad for? i can keep it without upgrading.

it takes time to build significant generations. if people get excited they can buy that these things earlier than they should. >> without knowing why. that's all you need to know is you're getting one. we'll see you next time. >> thank you. >> talking apple. yahoo! stock rallies after announcing that spinoff of the company's remaining 15% stake in alibaba. they're transferring more than 300 million shares into the unit called spinco. did investors get what they wanted from yahoo!? joining us are martin internet analyst at rosenblatt securities. good to see you again. >> good morning. >> so much praise for the tax efficiency and beauty of the tax structure, even as people continue to drill down on the core business with even more criticism. where's your head? >> yeah. there's a actually of teal tail of two stories. a lot much pushing the activist shorter term investor side. we have that done.

it's a process irs approval but i think it will get done by the end of the year. put that aside. the core business is stagnant. marisa and others on the team refer to it as stabilize, i have stagnant. it's challenged. display advertising really the crux of the business, pricing was down for the third straight quarter, 20%. they just don't have the pricing power to price premium ad inventory. as you go forward this year, you talked about the on the show, may ven, their new acronym, mobile, video, native and social, they're going to try to i think this year some time eliminate display ad reporting because it's not a good story and it's still soft. a lot of other alternatives for spb to place advertising, facebook and google the obvious big names, but it's so fragmented they don't have that pricing power from the advertising industry standpoint. >> martin, in the last day, people are already starting to

talk about marissa mayer as an executive differently, calling her a steward of capital and describing the core business as a hand that she was dealt, something that's maybe not possible to turn around. do you share that view? >> well, i think she has been a good steward of capital. to be fair and objective, she came in to the company 2 1/2 years ago with an alibaba stake she has done some maneuvering, sold less of it at the ipo, but was handed that on a silver platter. it goes to gerry yang five plus years ago who made that investment. at this point having it spin off, having it tax freeh, very liberty media, john malonish in terms of doing that that's great. the ability or the challenge to turns the company around from a growth standpoint isn't just up to her. a lot of ad sales execs have to perform, get better mind share, compete with facebook in terms of that ad spent and that's going to be the challenge and obviously this year coming up now, until the tax-free spin

happens a lot of people will consider it a foregone conclusion it's going to be a challenge for them to convince people there's a core business that they can regrow. >> martin, do myers critics have it wrong here? i'm starting to be convinced maybe they really do. look at gats mobile revenue, a quarter of a billion dollars. when meyer came on board, yahoo! hardly had any mobile developers. now they've got tum bler which has revenue potential, a number of initiatives that seem to be scoring high engagement wise with users. potential there at least. are we pay too much attention to the declining display ad business, not enough attention to the growing mobile business? >> well, i think there's some validity to the way you said that. the only thing i would say mavens acronym, mobile is a combination of display and search. the other three, video, native and social are largely display. call them what you want they're still a large display ad

component in there. also keep in mind that when you say display, that kind of brings back banner ads and ten years ago and in this case we're talking about a lot of rich media and much more advanced display advertising that is selling elsewhere including on facebook and other properties. the other thing i would say about marisa, she's done a great job when she came in revitalizing getting the culture better, engineers want to work there. she's never really been at yahoo! and actually gone back to google as involved in selling ads for the company and running that part of the business and i think there's been a lot of false starts in terms of people enrique left, three new people coming in, less attention to we got to sell ads because that's the basis of the business. >> yes. the old debate about being a product vers sus salesperson. thank you so much. >> right. >> see you soon. >> take care. >> when we come back a big week for social with facebook getting ready to report tonight after the bell. we'll tell you what to expect later on. plus, in an unusual move the chinese government issuing a scathing report on alibaba.

tech guru for "the new york times" will join us with details. what does it feel like to go from 0 to 60 in three seconds? amazing video of tesla's insane mode in a few moments. dow lost steam as the crude inventories show a huge build yet again. "squawk alley" will be right back. you just got a big bump in miles. so this is a great opportunity for an upgrade. sound good? great. because you're not you, you're a whole airline... and it's not a ticket you're upgrading, it's your entire operations, from domestic to international... which means you need help from a whole team of advisors. from workforce strategies to tech solutions and a thousand other things. so you call pwc. the right people to get the extraordinary done. ♪ take aand... exhale...in... aflac! and a gentle wavelike motion... ahhh-ahhhhhh. liberate your spine...

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major averages in the markets are mixed. the dow was briefly positive,

now down by about two points. s&p is negative as well. the nasdaq is holding on to green because it's largely weighted by shares of apple which are gaining more than 6% following the blowout quarter afterhours yesterday. the iphone maker saying that they sold 74.5 million iphones and that's giving the tech sector a boost after yesterday's steep losses. let's bring in larry glazer, manager partner with mayflower. apple we thought would carry the market. it did at least temporarily. now traders are worried about oil build in inventory and also what the fed is going to say this afternoon. how temporary will this effect be? >> today's market action is disappointing, particularly if light of yesterday's drubbing an particularly in light of the fact that boeing and apple both bellwethers had strong numbers. investors came in with two overarching beliefs one was that the u.s. was the best house in a bad neighborhood and the other there simply is no alternative to u.s. stocks.

those beliefs are getting investors into trouble. there are alternatives to u.s. stocks and we're seeing those leave the u.s. markets this year, whether it's gold, emerging markets, even foreign developed markets and the debt markets. investors are looking at earnings with skepticism and seeing currency an excuse for a lack of execution for companies yesterday like procter & gamble, caterpillar, microsoft and others. >> that was tough for the market to swallow. larry cat's ceo calling the u.s. economic environment fragile. would you go that far to say the u.s. is fragile? what do you think the fed will say about it this afternoon? >> sure. clearly there is a demand issue and an execution issue. companies are hiding behind the currency excuse to cover up the fact that they're not executing. we see boeing and apple, with the ability to execute, and they are export driven companies, yet those other companies failed to navigate the same waters. so that tells us who's at the helm, what's the product and strategy that's going to drive

investors. and for that reason, investors if we look at where flows are this year, for example, value is still very strong for investors. and that's probably a mistake. if we look at utilities as an example, in a yield driven world it's really a question of, when the fed acts, not if if the fed acts. very interest rate sensitive areas like that will suffer whereas growth areas have been shunned by investors and perhaps that's where they should be looking where they can outgrow the challenges from the fed. >> larry, how many more apples do you think we're going to get? if you look at why apple was successful, it wasn't anything they did. i would argue so much in the quarter, it's everything that they did in the quarters before the design of the iphone 6 and 6 plus. apple's penetration into china. all the software. i mean, clearly all of that, any other companies really have that or is apple just a standalone exemplary player in today's business? >> well, i think it speaks to the idea of growth versus value

in the marketplace. and by the way, in terms of opportunities, it's domestic versus international as well. and apple is clearly driving international growth. they are executing that but not alone. there are other companies. boeing is an export driven company generating growth from overseas. in a growth challenged world, low energy prices create a lot of opportunities for consumers in places like south korea and india. it's the company that seizes those opportunities that will execute and be rewarded. the biotech space has been largely immune to the currency issues. those companies have executed and been rewarded in the marketplace. investors need to stop focusing so much on the sort of value versus growth, look for companies that are executing and penalize those that don't execute. that's fair game in the market. not let corporate management hide behind the fact that currency is this excuse. a strong dollar is good for the u.s. consumer which should drive growth in lot of companies domestically. >> larry, that's as good a note as any to end it on. appreciate your time this morning. >> my pleasure.

>> larry glazer of may flower. shake shack upping the projected price range for the initial public offering from 17 to $19 a share. that is the new range the fast growing burger chain also increasing the terms of its ipo filing and plans to offer 5.75 million shares according to a regulatory filing out early this morning up from 5 million shares at 14 to 16 bucks a share. based on this new range, shake shack may raise up to $95 million. that would value the company at about 674.5 million dollars. still worth noting that is below where bankers were pitching valuation of about $1 billion. we'll see where it opens here at the new york stock exchange a little later on this week. when we come back what does insane mode in as tesla model s look like? great video and we'll show you it to you in a moment. dow down 16 points. "squawk alley" will be right back.

welcome back. i'm julia boorstin with a market flash. sky rocketing after reporting better than expected top and bottom line fiscal q3 earnings with stronger than projected margins thanks to digital revenue and success of dragon age. while the fis dal fourth quarter guidance lower than expected the company did revise up revenue and epps targets for march. ea shares trading up over 10.5%. >> thanks, julia. ins case you missed it the tesla model s apparently has a button called insane mode, not to be confused with beast mode. pressing this button in a tesla will take you from 0 to 60 in about three seconds. youtube channel drag times took it for a spin. check it out. >> go ahead and press it. >> i'm not going to throw up. >> i hope not. >> okay. that's enough. okay. i got it. >> oh, [ bleep ]. what the --

>> that's 70 miles an hour. >> whoa! >> that's 60. >> that's the insane button right there. >> oh, my god. brooks. oh, my god. >> that's 70 miles an hour. >> no way. >> punch it, right. doesn't that remind you of hyper drive? >> yes. >> that is not something you want to press on accident. >> yeah. great video there. count you down to the close in the uk and europe. stocks lower as worries of greece overshadow upbeat earnings reports. the athens composite in sell-off mode falling for a third day. new greek prime minister convening his anti-austerity cabinet. this ahead of talks with creditors over, of course, renegotiationing those bailout conditions. greek bank shares have plummeted to record lows down 40% since sunday's election. when we come back shares of apple in rally mode after posting the most profitable quarter of any company in

history. so where does apple go from here? we'll talk to the tech columnist for "the new york times" when squawk on the street continues.

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welcome back to "squawk alley." joining us this morning i think for his first appearance on "squawk alley" is farhad manjoo tech columnist for "the new york times" joins us from palo alto.

>> thanks. >> got a lot to cover today. obviously a busy day for tech. do apple, shares soaring after the company posted quarterly profit of $18 billion, the largest in corporate history. apple announcing it sold over 74 million iphones well above expectations. here's ceo tim cook on the call last fight. >> demand for iphone has been staggering shattering our high expectations which sales of over 74 million units driven by the unprecedented popularity of iphone 6 and iphone 6 plus, this volume is hard to comprehend. on average we sold over 34,000 iphones every hour, 24 hours a day, every day of the quarter. >> farhad, people have spent much of the past 12, 18 hours as jon says showering superlatives on kept and quarter. what strikes you about this quarter? >> a couple things. one of the things that has happened to apple in the past in these holiday quarters they basically kind of like failed to meet demand and it seems like

they really, you know, improved their production process from its sort of legendary peak before and they were able to make enough iphones which is one thing and then the other thing that's really interesting is that, you know, for the last few years a lot of pundits and myself included have been calling on apple to release a cheaper iphone. we thought that's what it would take to kind of break into the chinese market. what they did was kind of amazing, released a more expensive iphone. the average selling price went up and sold more of them than ever before. >> farhad, isn't it time to just pretty much say tim cook was right and everybody else was wrong? >> oh, yeah. >> here's my chart of iphone sales. here's the line on the far side. that's iphone sales in the last -- in the most recent quarter they just announced. that line is literally twice as high units wise as the holiday quarter when tim cook took over as ceo. i mean it's just a amazing. he was right about not doing cheaper phones, right about the phone not bending.

he was right about returning capital to shareholders and letting go of scott. right on down the line. i mean has the script completely flipped on apple's dominance versus your samsung's versus your googles going forward, and what do you think that means for apple's competitive position over the next 18 months? >> yeah. i mean the script has flipped. you know, it's really, people fall into this trap with apple all the time because i think that it's sort of we kind of wonder how a company can keep doing that. they're doing something unusual in the tech business, selling products at a premium price and they don't change their premium pricing and it still works. we expect products to keep getting cheaper and cheaper and that's what they thought, why we thought samsung would keep doing better. what we saw the lesson from apple software really matters and having kind of a very sticky user interface that people love and switch to, and don't ever leave, that's what really matters. and so for their competitive position, i mean i think that is

going to keep getting better. tim cook said the installed base still hasn't completely switched over to their newest phones and honestly they're going to have a newer phone this year and still a lot of room to grow with that install base and in china they did well in china. they're growing, their retail presence in china and they're in line with the sort of larger move in hoochina which is the growth of the luxury business. i think they're trying to position themselves as a luxury good and that could work for them there. >> farhad, now the parlor game begins. what does apple do with $178 billion of cash, growing every quarter, as apple sells more and more of its products. i'm wondering, now the choices seem pretty finite you do a big deal, do a big capital return program above and beyond what they have right now or a viewer suggested yesterday, maybe apple should just start buying apple pay terminals for more merchants to get them on-line. what do you think would be best for the company?

>> yeah. i mean i think that capital return program has worked well. probably, i bet there will be calls to expand that as their cash position grows. it's hard to think of a great thing for them to do with their money. ta they're not the kind of company that wants to do huge acquisitions. over buying a carrier. that's not a good business for them. there's no sort of huge thing for them do. so i mean, i think it's just going to continue to be one of the parlor games and keep wondering, more and more money and maybe they can buy a country or something. >> i can't imagine they mind all the speculation. move to yahoo! shares rallying after the company revealed plans for a tax-free spinoff of its $40 billion stake in alibaba. as forb its quarterly results the company's profits did top estimates, revenue in line with expectations. mobile sales up 23. farhad, you glad to finally be able to look at the business as an existing core business? >> yeah. i'm glad. i'm not sure that yahoo! is very

glad. i mean one of the things that they benefitted from, with holding all that yahoo! alibaba money over the past few years is that people didn't really pay attention to the core business. now that it's spun out, people are going to be paying more attention and, you know, one of the things that marissa mayer has promised is that this year would be the inflection point. she said this in the last earnings call that 2015 was the year that the new businesses would sort of start growing enough that the kind of legacy banner ad display business, the drop in that, would, you know, they would outweigh that. we'll see. i mean the results yesterday weren't extremely encouraging for that, but, you know, there's still a whole year to go and we can see what happens there. i think that she's made, you know, some strong moves in terms of getting video right, the video ad market right, bought acquisitions and they say that the tum bler deal will start to pay off this year. i think it's a huge question

mark and one of those things that people will be able to pay more attention to, you know, now that the alibaba question is resolved. >> farhad, do you think yahoo! becomes a takeover target as a smaller company, unincumbered by alibaba and if so, is a company like apple perhaps interested in at least pieces of it? yahoo! supplies a lot of data to apple that runs portions like sports scores and siri. >> yeah. i mean i think apple is not one of those companies that would buy that. they prefer to do deals that, you know, that -- with companies like yahoo!. i think one of the things that yahoo! has been angling for, i'm not sure it will work, to try to become the default search engine on the iphone which would be huge for yahoo!. i don't know if, you know, apple customers would really want that. apple is not, you know, the company that would buy it but i think there would be more and more speculation about other

companies and this question of a merger with aol's bid, talked about for years and years and might become something people want more now. >> although, jon, some argue she sounded like she thought that deal was doable last night on the call. >> she did sound like that. of course yahoo! doesn't have its own core search technology which is something that marissa mayer sounds like has been angling for. would like. but given the amount of capital that she has to work with now you wonder how possible is that? because that's an expensive business to get into. >> fimgly, unusual move, the chinese government criticizing alibaba, the government says alibaba has a credibility crisis because of a failure to crack down on shady per chants, counter fit goods, using its e-commerce platform. we asked jack ma about counterfeits during the company's ipo. here's what he had to say. >> we have a strict rooults rouls rules to see that.

copycat and fake products these are headaches of the world an we are solving that. >> we're going to talk to the vice chairman tomorrow at 9:00 a.m. strike you as odd this is coming from the chinese? >> not particularly surprising. i mean this is a question that you see come up often with chinese companies, especially as they get to be as huge as alibaba. but it doesn't sound like it's going to pose a threat to them. of course the counterfeit and other kind of shady merchant question is a real question that's dogged them before. it's something that, you know, has been part of the e-commerce market there. i think they've made moves it to try to stop it but i think it's a fair point. i hate to be agreeing with the chinese government but it's a fair point that you can make about alibaba and about sort of e-commerce in new markets generally. >> in the prospectus so far, alibaba seemed to acknowledge this was going to come up, an issue that loomds large for them and they tried to make it seem they had a strict policy in place but seemed more like a

self-policing one. i'm wondering from a governance perspective how a company this big should ideally police this? >> yeah. i mean it's very difficult. it's something that, you know, companies like ebay have struggled with and basically what it takes is kind of like scale. you need people to review and i think, you know, i think it's doable. it's not sort of an impossible problem. but it just sort of takes focus to do it. and it seems like until recently, i know until the ipo, there wasn't that much pressure on them to do so. >> farhad -- >> perhaps as -- >> yeah. >> you said -- i mean seriously the chinese government is going criticize alibaba over this. this is like a whole chinese cultural issue around fake goods and counterfeits, why come after alibaba. the one reason it doesn't surprise me i expected them to come after jack matteau knock him down a peg once he became -- >> for political purposes. >> yes. >> seriously, you're going to go after the biggest, most successful company in your

economy, accusing it of having a counterfeit when really kind of your whole retail base in china has a counter it fit problem, right? isn't that kind of. >> right. it is -- you're right. it is rich of the chinese company to call out one company and perhaps if it's, you know, if it's -- it could be disingenuous and not a sign of that being the real problem. i'm just saying that it is a problem for the company. >> yeah. maybe they have a mindset if they criticize one of their own they can hit us harder when it comes to u.s. based companies. hope you come back. what a treat having you. >> thanks. good to be here. >> farhad manjoo joining us from "the new york times." speaking again of alibaba make sure you tune in tomorrow, executive vice president will be with us for a first on cnbc interview and that begins at 9:00 a.m. eastern time. >> shares of facebook in the green ahead of that company's earnings this afternoon. what should you expect from the social network when it reports after the bell? we have a few answers for you a little bit later on.

first, rick santelli, what are you watching today? >> of course it's our fed day, second day, we're going to get a statement today. we had an important central bank meeting last thursday with the ecb. and the markets interest rate markets in the states have moved into a range. we're going to play defense in the ranges after the break. i'm going to call it deranged. tune in. ♪ [ radio chatter ] ♪ [ male announcer ] andrew. rita. sandy. ♪ meet chris jackie joe. minor damage, or major disaster, when you need us most, ere. state farm. we're a force of nature, too. ♪ we're a force of nature, too. grand prix race car made history when it sold for a record price of just under $30 million.

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traders are playings the quarter and what one of the street's most bullish analysts says the company needs to do now to maintain that momentum. days away from the super bowl, we're talking to one of the biggest bookies in vegas ate who the -- about who the big money is betting on. two new names on our ceo hot seat list. we will reveal those in about 15 or so minutes. kayla? >> we will be there. thanks, scott. to the cme group, rick santelli standing by. rick? >> thank you, kayla. happy fed day. i guess the federal reserve is kind of epicenter to many today not necessarily in their efficacy of their mission but the notion that they're still here. they're here and they're going to be here for a while. what does it mean? i like ranges and i think it's especially important not to ignore them. there are forms of consolidation that give you wonderful clues into the marketplace and many of you may recall there was a period let's put up the chart

starting in october of 10-year note rates real stretch in october, november, where the significant bottom of the range was around a yield of 230 at a time where many thought there was going to be a push for higher rates as we moved into year end and we're looking at various fundamentals firming up, think gdp that was coming out in those particular sessions. but when ended up happening the minute you started to get below the range not only did it accelerate, that wasn't the fun part, keep in mind that chart, when it came back and tested the bottom of that 230 range and failed, that's when things got wild. that's when we had that big move down in yields. well how is that significant today? on a variety of levels. we see that the 10-year, once again, and the 30-year bond are forming rages, tight ranges, which potentially means you get above or below. in this case if we start settling under the 1.70s on the 15 when we had the low 20 month

yield close the late cash close right around 171 in 10s, since that session, lowest yield close has been basically 1.79. you know when you're offsides you start to trade a on a closing basis or on the other side of the coin until we start to settle much above the 185 to 186 area. now when you take that in the context of what the ecb did, we're going to tie this all together, in essence, we've had a very unusual response in the marketplace. today everybody is talking about the 30-year auction in germany. where there wasn't a lot of interest. even though it's only anecdotal small pops and yields in the eurozone like italy and spain, you need to pay attention. feelings are important sometimes in the marketplace. and many suspected that the lead in timed to what the qe

announcement of last week's ecb meeting might have sucked up all the good trades, a and maybe we have to wait until march on implementation to see the fine details enter in. at this point don't underestimate the notion that the fixed income market is not performing as most traders had anticipated and also remember being a fan i get this, when they do good for a couple weeks everybody wants to jump on the bandwagon. the new bandwagon is being lon some of the sovereigns looking for lower rates. hasn't been necessarily true the last several years when they fight -- many traders fighting that. since everybody has jumped on if you see rates pop much higher than they have recently, it's probably time to reassess the near term technicals of some of the best quality sovereign interest rate markets. back to you. >> all right. thank you very much. we do want to remember a somber moment in american history. on this day back in 1986 the space shuttle "challenger" exploded just over 70 seconds into its flight. all 7 crew members were killed

including a teacher christa mcauliffe set to become the first citizen in space. the disaster caused by a failure in one of the rocket boosters and a good chance you can probably remember where you were when you heard that news. we'll be right back. g a busines, legalzoom has your back. over the last 10 years we've helped over one million business owners get started. visit us today for legal help you can count on, to start and run your business. legalzoom. legal help is here. and you can move the world. ♪ but to get from the old way to the new, you'll need the right it infrastructure.

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welcome back to "squawk alley." caesars entertainment the stock is spiking after a dell judge ruled that the chapter 11 case will proceed in illinois.

the judge was denied a motion by several creditor groups who wanted the case to be heard in dell where they filed an involuntary bankruptcy petition days before caesars made its own filing basically the bottom line here is, bond holders may have gotten a sympathetic here in delaware. stockholders here, carl, maybe get a better hearing in chicago. back to you. >> nice to see a couple green arrows. thank you. the dow up about 54. we did see the mid-morning sell-off, hard to tell what it was pinned to. crude inventories did come out earlier this morning president the biggest three-week increase according to bespoke since '89, 24 million barrels over the past three weeks. an awful lot of oil on the market. >> an four times expectations. that's not a slight increase. that is a huge increase over what was originally expected. it did hurt the crude market. you can see wti down by about 2.25%. which had moved the markets but we are back in the green. the dow by about 61 points. >> when we come back details on

the curious case of the drone on the white house lawn. we'll get the full story in just a moment.

this is "squawk alley." watching shares of the parent companies of chilies. the stock moving lower on fourth-quarter results posting better than expected profits but missing on sales. higher prices for meat and dairy a drag. the stock which hit its high this week, a 52-week high, is trading, down by about 1.75%. back to you. >> thanks, dom. taylor swift getting hacked on both twitter and instagram might be the only thing those two social networks have in common this month. stock wise facebook and twitter have gone in different directions. facebook down, twitter up, though today that's reversed. facebook set to report earnings today and twitter next week. which is creating the biggest opportunity for investors? scott is the head of tech equity research. what are looking for in facebook's report and is there any read through from apple? i mean engagement on iphones is high, people buying a lot of iphones, is that good for facebook and the quarter?

>> you know, jon, good to be with you again. that's an it interesting observation about, you know, frankly just the tremendous results that apple put up and what people could kind of construe for facebook. but to be frank, i think the company has more than enough momentum, you referenced instagram, obviously with that property already having over 300 million users and just starting the process of monetization, that's one of many levers that facebook is in the process of pulling as they really, i think, try to make this a more diversified company in terms of its franchises and its revenue and profit mix. >> what really spooked investors last quarter was when executives started talking about how they will have to spend more aggressively to reinvest in the business to ensure future growth and revenues. i'm wondering what type of number on expenses you think we'll see if it's going to be extreme or maybe a little bit easier for the market to swallow? >> well, kayla, the way we think about it is, they're making

these investments because they can not because they need to. and i think that if facebook is able to continue to deliver revenue growth and i'd say kind of healthy margins, i think that the investing public will be more than satisfied and all the while, facebook, if you remember when they reported their q3 results, i mean the stock got hit pretty hard initially and then pretty much recovered and it's actually higher, i think, than it was the day before it reported or so. so at this point, we think expense is definitely one of the line items that people are looking at but what people really want to see is if the investments that they're making are paying off or are poised to pay off. we'll get pore more on that later obviously. >> we're talking about china today and the 70% gain in revenue for apple. it's hard to think of an executive who's done more to

court chinese citizens, customers, and the government than mark zuckerberg. >> that's a good point, carl. whether it's, you know, learning and speaking, mandarin, in an event that i guess was broadcast or, you know, basically hosting some nationals from china at facebook, i think that look, mark zuckerberg is very kind of aware of the fact that there's a big market opportunity there. when you think about facebook and its growth in terms of users, i mean look, this is a pretty mature company with 1.3 billion users already. clearly china could change that dynamic a little bit. we don't think at this point that china is going to have a major impact on facebook in terms of its operations, its revenues or profits. that's an opportunity but not right now. >> what about currency, unlike a lot of growth companies, facebook actually has significant business in europe and in canada. is that going to be a significant headwind in this quarter and in guidance going

forward when you combine that with the cost they have tell graphed that they expect. >> yeah, jon, that's a good point and frankly for anyone who's interested or invested in technology sector, i mean that sector generates a higher percentage of revenues from outside the u.s. than any other facebook is a very global company and we're not expecting the company just to kind of indicate that it was business as usual. the increasing dollar will have a negative impact. we've seen it frankly hurt the revenues of everyone from apple to microsoft. so this is something that people should be aware of. >> twitter, scott, we're going to get earnings from them next week. $40, proving to be tough resistance for them. i wonder if anything good out of facebook tonight means bad things for twitter next week. >> i don't know, carl. obviously facebook has implemented some functionality that seems to be more comparable to what twitter is doing, the

real-time facebook posts that are appearing in conjunction with other posts that people are seeing on facebook, for example. but the reality is look, we think that twitter is unfairly criticized because of the fact that they haven't started the monetization process as quickly or as successfully as facebook or they're not as big or they have some kind of aspects of the model that aren't as comparable. the reality is they've been doubling revenues and they've been growing their business very substantially and we think there is a lot of opportunity for upside given the negative sentiment on twitter at this point. >> finally, scott, we have the -- in the fex next day, alibaba earnings, second quarter of earnings as a public company. they have to address the yahoo! spin of that stake. i'm wondering how you think they'll address it and do they buy back the stake? what do you think is in the cards? >> kayla, we initiated coverage of alibaba earlier this month with a buy opinion. our 12 month target is $124.

to be candid, we expect alibaba to address the spinoff and frankly indicate that they probably would have an interest in some type of transaction that would enable them to essentially shrink their float and if that means repurchasing some or all of that stake i think it makes sense, particularly if they can get it at a discount which to us seems like a possibility. >> all right. scott kessler, thanks so much for that perspective. we'll all be watching facebook after the bell for sure. >> thanks. take care. >> make sure you tune in the next hour. scott whammer in has carl icahn talking about apple earnings that begins in about 45 seconds. i know you well enough john to know you're going to be watching for qualcomm tonight. >> yes, indeed. they are important to the yo smartphone market. china looms large, see if they have any prospects of wrapping up the regulatory issues there. >> keep our eye on that. facebook and qualcomm will be the big names. alibaba in the morning and we'll talk to joe at 9:00 a.m. about

piracy and other issues. >> big news making interview as he always is. >> absolutely. i think the judge has not only icahn but sons as well. let's get to wapner and the half. and welcome to the halftime show. let's meet our starting lineup. stephen weiss, is managing partner of short hills capital. joe terranova senior managing director at ver tis investment partners and pete najarian is the co-founders of option munster. we begin with the blowout quarter from apple. the company turning in the biggest quarterly profit ever by a public company. some $18 billion largely due to strong iphone sales both here at home in china and just about everywhere else and it's cash pile is growing at $178 billion, now bigger than the market caps of at&t, disney, bank of america and others. we're going to hear from billionaire investor