squawk box. >> good morning, welcome to squawk box here on cnbc. joe and andrew are off today. our guest host is andy. good to see you today. >> good to see you. >> we have a lot to talk about. >> just a little bit. >> a new warning from the imf. the fund is urging the world's leading central baichks not to raise interest rates. the performance is falling short of expectations. the fund calls on the fed to remain data dependent and not take any reaction. imf is also suggesting that the ecb should expand it's quantitative easing program. the imf and what it has on its agenda, it's responsible largely

for these nations. that's when things hit hard when it comes to the stock market. the european central bank policy makers are today and due at 7:45 eastern time. most suggest it will hold back but cut it's inflation forecast. mario draghi will be holding a news conference and covering it all right here. let's get you up to speed on the markets as well. a bit of a huge turnaround with the markets up close to 300 points for the dow. there's green arrows and in combination with what we gained back yesterday you're about back even with what we had two days ago before the big sell off. the dow futures up by 65 points. s&p futures up by 8 points and the nasdaq up by 23. >> here's the other big stories we're watching today. china stock markets closed until monday as the country puts on a massive military parade to commemorate the defeat of japan

in world war ii. they watched column after column of tanks, missiles and troops in a display of china's growing military might but also pledged to cut 300,000 troops. perhaps to show they have to expansionist threat. ve we'll get you a live report from beijing in the next half hour. in corporate news the ceo of japan display hinting at strong orders from apple ahead of the new iphone launch. apple was never mentioned by name but his biggest client is increasing orders. a new iphone is expected to be launched later this month and sygenta plans to sell it's vegetable seeds business and buy back more than $2 billion worth of stock. this comes as they try to boost shareholder returns as it rejected the take over offer from monsanto. >> the retailers earnings

matchingest ms bmatc matching estimates. planet fitness posting results for the first time since going public. earnings and revenues beating the streets. the gym operator didn't update membership numbers which some analysts had been expecting. shares of lannett soaring. it's buying ucb for 1.2 billion to expand it's specialty generic drugs portfolio and glass lewis opposes bank of america's proposal to let him keep the chairman and ceo roles. glass lewis normally supports having them held by different people. >> let's get a check on the marks. take a look at the futures. you're talking about lots of volatility that's remained in this market. yesterday you saw the dow up another 293 points. the s&p gained 35 points.

the nasdaq was up by 113. that got back most of the losses you had seen from tuesday. it was about 30% of the dow's losses and the nasdaq getting back about 80% of its losses from tuesday. if you want to know what this has been like over the last two weeks, the dow saw it's tenth triple digit move in the last 11 sessions and the nasdaq moved over 2% for the 7th time in just the last ten sessions. now if you want to look at where we have been, at the end of the day the dow gained about a thousand points from there. about 6.4%. the s&p 500 is up 4.4% from last week's lows and the nasdaq is up by over 10.5%. >> let's check out what's happening this morning in europe. you'll also see green arrows there. the dax is up by 1.6% with the cac up 1.3% and the ftse in london up. overnight in asia, we mentioned

china being closed but you saw the nikkei was up about half a percent. take a look at oil because this has been the other market that we have been watching so closely. it was a pretty choppy day for oil yesterday. this morning things are calm. sitting right at $46.20. end of the session yesterday oil was up by 2%. also let's take a hook at what's been happening in the bond market. you'll see that the ten year note is yielding 2.177%. when it comes to currencies the dollar is up across the board. euro trading at 11225. the dollar yen is at 12034 and gold prices, at this point, they're down by about $3.80. $1,129.80 an ounce. >> now to our news maker of the morning. treasury secretary jack lew sitting down for an exclusive interview. he addressed head on the recent volatility and concerns brewing about systemic risk and economic

weakness. >> we're keeping a careful eye on market volatility. we're looking at what, if any, risks there are and have not seen the stresses that would cause us to have any immediate concerns but we're obviously always watching. >> it was a monday about a week agatha the market opened down about 1,000 points. tell us what you were thinking. >> i keep my eye on the market but i try to not respond immediately and make judgments based on minute to minute or day-to-day market moves. what i tend to do veeis reach o to my colleagues and senior leaders in the financial world to get their views and there was a pretty strong sense at that moment that it was a response to

some specific concerns, particularly concerns about c o china. >> do you have concerns about high frequency trade something? is it something we need to do more? >> it's something we need to continue to look at. we see the market open and close with dramatic movements and it raises questions as to whether there's things in the architecture of the markets, the structure of the markets that are contributing to some of the moves. i don't have a clear answer for you. i don't think frankly anyone has a very clear answer except there is a set of questions which we have raised already about other ooech ooec events in the markets unless there's something about the evolving structure of the market that requires a lot of attention. we have to do a lot more thinking and study. >> i have to push you a little

bit. there's more regulation and the idea that maybe there shouldn't be such an ability of computers to go in and control it. >> i think it's premature and when i looked at this over the course of the last three years, several times, the questions of high frequency trading, it seems to me that it falls into several different baskets of concerns. the two we have to keep our eye on is is there something about the plumbing of the system that's undermined by high frequency trading or unfair advantage gained because of the way it's structured. >> i don't think it's a great idea for us to pick and choose what forms of investment and market practices are the way of the future. i think government is trying to think that through for markets and can get you to a bad place but i do think we have a responsibility to ask questions about whether the markets are being stressed in ways that create risks or create some kind of unfair advantage or disadvantage. >> so it's something they're

looking into but he didn't have any specific proposals on this. this is an interesting time for the treasury secretary where virtually every issue on his beat, china, iran, markets, the economy, he's on his way to turkey for a g-20 meeting and we'll talk to him about all of these things. >> we were talking as he was talking about just another morning and i don't pay too much attention to that. >> i think he's trying to convey a confidence in the markets and one cool remove away. that's the way he's trying to portray himself. >> you didn't believe him, right? that it's like that about the whole thing? >> i asked everybody that question. i asked several fed presidents that same question and they all

talk about this removal from the day-to-day operations. >> there's two old saws. one, it's okay. it's not that bad and two it's not the real economy. >> true, you don't want the treasury secretary running around with his hair on fire. >> particularly with this head of hair. >> good head of hair. >> but at the same tie you want to feel like we sat up and took notice of this. this is a little out of the ordinary and we're concerned about what happened. >> i actually think it would have been this idea that we're looking more closely into this thousand point drop. how many times were circuit breakers triggered on that morning. >> they told us on the show yesterday that they're looking into this closely. waiting for data to come through. figuring out the role of etf. >> hft. >> and watching the flash crash

closely too. >> there's a growing sense that it wasn't in control anymore. we have to be careful that we're not creating more risk in the system. >> and picking winners and losers, i thought it was interesting that he said we don't do that. that's what the other side of the aisle always said. >> there's another part of this interview where he criticizes china. they're arresting journalists and harassing people. it's on the front page today, global investors rattled by china's hunt -- >> to find a scapegoat for what happened. >> we can't be that. >> i want to ask you about more of what he had to say about china. how concerned is he by the currency moves and the fact that they're selling treasuries. >> what was interesting in the part about china that they'll get to in the next hour is i had

a lot of officials off the record criticize the way china handled the devaluations and thought it was a rookie series of mistakes. ham handed. on the market side. but also that they didn't -- they don't understand their power. apparently china spent $400 billion in the market and defending it's currencies. the treasury secretary of the united states can say three words and do what needs to be done without spending a single dollar. >> what are the two words? >> dollar is to weak or dollar is too strong. >> that's four words. >> i say three words. anyway, for all intents and purposes, three words and get done what he needs to get done. china had to spend all of this money and did it in a way, it was rookie. the problem with what china did to the officials i have spoken with is that it didn't seem like

it was becoming of the second largest economy of the world. they didn't do it in a way that was professional. >> they will become that recently. >> and they're monitoring and regulating their stock market which is also ham handed to my mind is another huge issue. >> there's another word other than ham handed. the currency is ham handed and the stock market is outrageous. arresting a journalist, we need to be careful about. that's outrageous. >> the narrative is you want the chinese to stop manipulating their currency but you have to measure the way you criticize them because you're concerned they'll stop buying treasurietr. now they have given you the cover to say what needs to be said, haven't they? >> and the chinese premiere is coming to washington in september which colors how much and how jack lew is speaking. you're right about that. the other irony of all of this is that the chinese currency sold off and then the government steps in to keep it from selling

off which is essentially stepping in to go in the direction that washington wanted them to go for the currency to appreciate so we were in a pickle right there. >> all right. steve, thank you. and we will see you in the next hour to talk more about this interview. >> yeah. >> when we come back we'll have big news from tesla. plus elon musk teasing consumers eager to buy a cheaper version of his cars. the details are next. but first as we head to break, take a look back at this date in history. when you get up to 50% off hotels with travelocity,

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the library never closes. it makes it so much better to do homework when you're at home. internet essentials from comcast. helping to bridge the digital divide. welcome back. lots of news from tesla today. the company will begin delivering it's first luxury cross overs on september 29th. it's the model x. it will be priced between 132,000 and $144,000. >> that's a little rich. >> if that's too pricey for your taste then elon musk has good news for you. he tweeted a cheaper mass market tesla will start at $35,000. the company will begin taking preorders for the model 3 in march but don't get too excited. he cautions production won't begin for about two years. >> i like the doors.

>> wow. >> back to the future. >> the extra $5,000 is needed to cover complexity and other issues. maybe an extra 5k isn't is bad but that's an expensive car. >> a 400 mile range instead of a 200 mile range now which is huge. >> it's a big country. in market news we're learning a lot about how hedge fund managers faired over the recent stock turmoil. bill ackman saying it fell 7.7% over the last month. a gain of 607%. >> that's better news than we heard earlier. so that's improvement. we should talk about narcotics rebounding clawing back ahead of tomorrow's jobs report. joining us to talk more about it is the chief financial economist at bank of tokyo mitsubishi. of course still with us this

morning is yahoo!'s editor and chief. larry let's start with you. do you think that the volatility is calming down at this point? or is there more to come? >> there's no question. the wheels came off the wagon in the chinese equity markets the last few weeks but now instead of the wheels coming off the wagon we're seeing a disease begin to spread from wall street to main street. it's an obsession with what the fed will do over the next few weeks and months. and they're missing the improving economic data as we're data dependent like the gdp and potentially the jobs report. as long as that overhang is there, that volatility will be with us particularly as the fed looks to change it's pollty over the next few months. >> as long as that overhang is there that volatility will be with us. you think that the market would actually react calmly and with relief if the fed were to raise interest rates by 25 basis

points. >> look. whether the fed acts in september or whether they act in december it's largely priced in at these levels. it's probably not going to matter to a small business on main street. probably not going to matter to the u.s. economy as a whole and from a credibility standpoint the market might rally on that news and get it behind us. potentially we can focus on what's really going on in our domestic economy. autos have been great and housing has been good. we can't get past the rate hike to focus on the data and what that means for earnings. we need to maintain the credibility and get stability in the market and remove uncertainty. >> the market is not the fed's primary mandate or the secondary mandate either but it's something they have to be watching and if they were not ready to raise in june or july what makes you think they're ready to now after the last month? >> they're very very close. the way to view it is yellen if

she had her own vote and she could control it is more of a december person but she represents the committee and the committee is split. six want to go and maybe four don't and an important four don't and probably yellen as well. >> do you think fisher is in that camp too? >> no, i believe he's a september person. they want to get it up off the lower bound as they call it. remember we had car and truck sales going at 27 minute, now it's been four straight months. the economy is pretty strong. it's stronger than people think out there. >> so you're also in the camp where you think they should go ahead and raise in september as well? >> yeah it's like a lawyer. if you don't have the law on your side, you don't have the evidence, you pound the table. i'm not going to back off september because then if i go to december people will push it out to march.

it's a game. >> people keep saying it's october. let's just say they need a couple of extra weeks. could they go? >> yeah, they might change the language from saying in july they said some further improvement. maybe they'll put in there in the meeting just a little bit more improvement meaning october. >> does it remind you of a driver trying to pull out into a crowded avenue and you're waiting a long time and finally you drive and you have to go just because you've been waiting a long time. that's not really a great reason to raise rates. jus because you've been waiting a long time. >> we can find an excuse. >> it's not tightening, right? >> just ten years ago we believed the fed could raise rates. >> these were emergency measures. just like with oil prices.

should oil be at an emergency level, why should we hire anybody? >> by the way i think they should have done this a month ago or three months ago, six months ago. >> there's real remorse on that point. >> i hear a lot of people saying that. well too bad. here we are now. we have to look at the data today. we have this big rattle and we have to take that into account but really we have to look. looking at the main street economy. that's the big deal. >> well a couple of months ago they didn't know what gdp was so maybe they didn't have the ammunition to go two months ago but there's always going to be something. >> always going to be an excuse. >> remember when it was greece. how quaint that looks now. >> even today. >> russia and ukraine.

>> the imf today saying don't raise. they're cautioning people not to raise. that's just an excuse for the fed not to take action and that gets you in trouble. let's talk about the mandate. >> christine legarde has said this before and the imf has a very different mandate. >> absolutely. i completely degree. >> and they're concerned about developing markets and those will be crushed by the idea of raising rates. i don't know that the fed will take that into a massive amount of account. >> it's just 24 hours away. this is thursday, right? >> the market isn't discounting september and they're not even looking for those 100 basis points of rate hikes over the next three years. like even the doves on the fed think they're going to get. they can be put off easily if the numbers don't hit their mark. so it's 220,000 payroll jobs. pretty much has to be there. unemployment has to come down

from 5.3 to 5.2 and wages have to hold at 0.2% for the month. 2.1 year over year. if we don't get that constellation of data and the market rallies i wonder what the fed is going to do. >> you get a very strong jobs report it's going to be difficult not to take action. the market will look closely at that for a sign of confidence. are they going to imply that the u.s. economy is improving and recognize what's happening in autos and the stock market and housing as a whole or deny that and minimize it and their credibility comes into question. >> they can recognize everything you just said but they could also recognize that china is the wildcard and we're not exactly sure how big of a wildcard it plays in fed thinking and maybe we'll get more clarity on that.

>> how will this all impact main street. so far, nothing. there's been no impact on main street america. >> a quarter point will change things there. >> maybe not main street but the stock market is clearly impacted and if you look in the last two weeks clearly when the machines took over and you saw the volatility ensue some of that is do to the fed overhang. the fed has to take responsibility for the volatility when people ask where it comes from. it's fundamental at some level and that's what we see as this uncertainty drags out and we continue to have these discussions without real conviction or action from the fed. >> we're all agreed that the jobs report tomorrow is incredibly important. everything is riding on that and we'll be taking care of that and watching at 8:30 tomorrow morning right here on this show. thank you both very much for coming in. great to see you and andy will be with us for the rest of the hour. scott. >> coming up a live report from beijing on china's massive military parade and how that country's recent stockmarket

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eunice joins us now with more on this one from beijing, eunice. >> thanks so much, kelly. the military parade here was a massive show case event for china. it came at a very critical time for the chinese president when the leadership is facing a loss of confidence in international circles over the currency devaluations and the stock market plunge. today we saw 12,000 troops marching and it was in security lock down and foreign troops took part for the first time and what was also on display was military hardware that the public has never before seen

including a ballistic missile which military experts say is aimed at consigning aircraft carriers and they're a central part of the u.s.'s naval strategy in the pacific. the russian president was in attendance but there wasn't broad based international support especially from leaders in the west. many countries were put off by the very anti-japanese sentiment that was surrounding the propaganda as well as the press of this parade. now going forward most people were talking about how the chinese president was trying to send his central message which was that china's rise is going to be peaceful. he also said that the government was going to down size the army by 300,000 troops as it modernizes the military here. back to you. >> can we go back to you on that? this was an interesting announcement that i don't think people were anticipating but i'd love to know how it was received. cutting the military by 300,000. what do you make of that?

>> well, it's seen as a way to change the make up of the military. there's been a lot of speculation that the chinese president was going to announce reforms of the military and that the government here wants to see a different type of military where it's not so skewed where you see an army, an air force, and a naval force and the chinese military at this stage isn't spread out in that same way. a lot of people are expecting to he see more reforms so that the chinese military will move in the u.s.'s direction. >> i also wonder, you know, we had the journal reporting yesterday about these ships seen near alaska in the bearing sea. now obviously the timing with the parade would almost make it seem like a calculated move to enter these waters. is that all part and parcel of this? is there a wink and a nod that

yeah this is part of the show of might or is that something entirely separate? >> well, the chinese government would not confirm that there would be any sort of link here but yes there was a lot of speculation about whether or not there was. at this point the way that they're seeing -- the way they counter the u.s. naval presence is with this ballistic missile. there's a lot of discussion over the 20 2 1-d and this ballistic missile is named at aircraft carrier so today the public was focused on this missile which is supposed to be a way for china to counter the u.s.'s military presence in the pacific. there's also a lot of focus on another missile that could travel as far as guam. so a lot of the focus was on

raising the nationalism and really getting people to feel good about choo in a's growing mite in the region. >> thank you as always. we noticed the clear skies behind you. we hope it stays that way for you a little bit longer. that's eunice yoon in beijing this morning. >> it means east wind. andy we're watching all of these from what's happening in the economy. >> just as they're taking the stage, the second largest economy right now they have much more mite to throw around. >> there's three big things going on. there's the reform and anticorruption campaign and the military reform is part of that. there's the stock market that is, young, immature and mishandled by the government and the deceleration of this economy

that's been botched by the people running the economy and his ministers so those are very complicated and very complex. he has a huge job, he's now coming to the united states and all eyes are on china. it is a big moment and the very stability of the country is at stake. >> the anticorruption movement is blamed for why you see the slow down in the economy. >> the wheels aren't getting greeced the way they used to be and if you want to move forward and have a better stronger economy you have to do that by cutting down corruption but it won't be easy to do. >> the real question to me is can an authoritarian government run a free stock market and economy and if this is an example of how that works it's not working if you follow. in other words, are these two things able to coexist?

and you know as the country welcomes more market driven they need to open up and be transparent and have rule of law but they don't. you're seeing people getting detained and pulled out of their homes. journalists being detained and arrested and having to make confessions and show trials out of the 1950s so this is primetime and they better step up. >> communism cannot be capitalism in ten minutes and maybe you chock this up to growing pains. it's an emerging market for a region so maybe we shouldn't be surprised by the peaks and valleys of trying to manage all the issues. >> we expect a lot from them and we should. it's a huge market but you're right if they're not ready for primetime they're rocking the boat. everything they do is scrutinized and have implications around the world. >> andy is our guest host for

this hour and more from him when we return. >> up next, the drones are coming, the faa giving the green light for business use of more than 300 drones. we talk to the ceo about the drone frontier.

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>> the skies may soon be filled with drones. they'll fly 324 drones for commercial use. it's the largest fleet to get the okay at one time. brandon joins us this morning. welcome. >> thank you for having me. >> can you, i guess, characterize the significance of this approval by the faa? >> yes, so this is the first time the faa has approved this many different types of drones

and aircraft for commercial operation here in the united states. we went to the faa about three months ago and asked them to really look at trying to expand the number of aircraft that we might be able to use for large commercial customers and agriculture energy insurance and infrastructure inspection. >> to do what sorts of things? >> it's about collecting imagery. we're most interested in helping our customers better understand how it can improve processes and save them money. >> that's interesting. you have very big customers. boeing, ibm and ups. >> yeah. they were part of a study that we did several months back with the american red cross in determining how drones can be used to support disaster relief efforts and really help the red cross and other organizations

better deploy resources and save lives and rebuild communities. >> sort this out for me. is this just you guys getting the approval for your 324 drones? and what makes you so special? >> sure. what makes measure really special is we're the first nationwide drone as a service company. and we mean what we're providing to large commercial customers is a turnkey on demand service. there's a lot of manufacturers out there and a couple of other operators out there. what makes us special is we work to develop a wholistic solution and get them the data. it's the data that's most important. it's not the drone. hardware is becoming a commodity. we think that services and service providers will be the real future of the drone industry. >> can you talk about the regulatory challenges? are there federal, state, municipal, how do you navigate

all of that? >> this is a highly regulated industry. we won't operate unless it's safe, legal and insured and they have done a great job of moving the regulations along. this time last year we weren't able to operate commercially in this country. they have to go through their process. these are aircraft and we think they should be operating in a safe manner. we expect there to be regulation in this industry. we support it and what the faa is trying to do and we have been working closely with them since day one to make sure that we have all the permissions we need to fly for commercial customers. >> these are already in the air or soon to be? >> we have drones in the air throughout the united states. measure expects to have it's drone fleet in the air this year

servicing large customers like i said in the insurance industry. >> thank you for coming on. >> thank you for having me. appreciate it. >> yeah, appreciate it very much. >> coming up is the china slow down showing up on u.s. shores? especially when it comes to one of the nation's busiest ports? the ceo of the port of long beach will tell us if he's seeing any signs and check out the futures. we're still looking for a positive open of the dow. the s&p 8 higher, the nasdaq 22.

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welcome back. we keep hearing that china's economy is slowing and it's one of the reason markets around the world are so on edge. one of the ways to keep track is through traffic and reports. john is the ceo of the port of longbeach which just posted record volume in the month of july beating out the number one port of los angeles. welcome to you. >> thanks. good to be here. >> what does record volume mean and what are you seeing in terms of our exports to and from china? >> volume was the largest in our 104 year history so it was significant but what we're excited about is we're back to prerecession levels in terms of coming through the port complex and that's a good indicator of general strength in the u.s.

economy. imports to the u.s. are very very strong. we're seeing around 4 to 5% right now overall which is a good indicator. china is obviously the >> 10% year on year? >> yeah. >> have we ever seen a drop like that? >> no. no. it really -- you know -- really ask the question about the consumer economy of china and is it really taking hold and i think that that's going to be a challenge because, you know, it didn't happen as fast as they thought it might and so they are relying now more on exports to bolster their economy. so, we are going to see that. >> but if you had to gauge the economy of the united states right now, which is what the federal reserve is trying to figure out, you would say it looks like it's in very good shape, based on what you see? >> good shape, strong, strong consumer activity. we are seeing it through our

volumes. we have had -- this year has been most interesting because it's been a solid high number every month since march. so, typically, we have this big peak in the -- in the fall for -- for holiday goods and so forth. it's been strong and steady since march. >> wow. >> how do you compete against other ports? i mean, you're competing against los angeles, seattle, how do you make long beach a preferable destination? >> we focus on technology investment. in fact, our port probably, by far, is the biggest investor in infrastructure. we are outstripping everybody else by a wide margin, about $4.5 billion in capital improvements in our current plan. and so we are building state-of-the-art terminals, all automated, very sophisticated, and we are able to handle these very large ships that are coming now into the united states. no one -- no one else in the united states can handle these

14,000 container vessels. they are massive, massive ships. >> 14,000 containers on one ship? >> that's right. >> that's big. >> and those are babies compared to what's coming. we have customers that have 21,000 container vessels on order. >> before i run out of time, john, i want to go back to this 10% drop this is huge. >> s. >> is this in volumes or dollars? >> volumes of containers. >> how much traffic is it oversmall it may be down 10% but maybe not a huge absolute number. >> well, a pretty big number because if we are moving 700,000 containers a month, which we are, half of that volume is export. of the export about 70% of our business goes to china. >> 70% of the 350,000, which is half of the 700, and that's down 10%? >> more like a couple hundred thousand because there's also empty containers that go back with the exports to fill up and bring back, but it's a very significant number because 30 --

we are about 2:1 in terms of import versus exports. >> what does it mean for your business if we don't see a rebound soon? >> i don't think it's bad for us because we are seeing so much robust activity on the import side that for us, the business is very, very good. >> 10% drop in volumes. >> on the export side. yeah. >> john, thank you so much. that's certainly going to catch people's attention. that is john slanger, the ceo of long beach. >> a final thought from our guest host this hour. andy, you have been watching the markets, as we all have, probably vacations interrupted, coming back, figuring things out, how long does this volatility last snuff been doing this a long time, watching markets a long time. what do you think? >> the question what do we need to see from china to make the markets globally calm down? i think that's huge thing much the other thing that i'm watching is the impact on mainstream america. and interesting what john was saying about the drop of ex-sports to china.

companies making things that would go in the containers, businesses are down 10%. we know our exports to china is not a huge, huge part of the u.s. economy overall. so to my mind, secretary lew and the people in the federal reserve, janet yellen, are going to be watching the number tomorrow but also watching every indication of the health of the domestic economy. >> john's still here and john, would you take that 10% drop in exports and say it's entirely because of china's economic slow down, not necessarily the strength of the dollar or a combination of the two? >> combination. definitely, the strength of the dollar is making more expensive for markets to buy our goods. >> so it's something that -- no one is expecting that strength of the dollar to change any time soon? this is the new normal? >> if something, stronger relative to international currencies. >> so andy, that's something we are all keeping an eye, just in terms of what happens on main street america though. it's hard to get your finger on the pulse. we have been saying for a long time that americans are unhappy. they don't think the economy is headed in the right direction.

but if you look at any of the economic numbers have come out around the jobs market lately or housing or autos, they are fine. >> i remember in the 1990s asking people, you know, what your job prospects were and they would say, oh, with this economy, i don't know if i'm ever gonna get a job. and said you're never gonna see a better economy than this right now the u.s. economy is in good shape. i think it's unavailable. of course there are people having a tough time to get a job. wages are not great. but the economy is in good shape. and to suggest otherwise is wrong and i know, you know, people like to complain and not everyone is in great position. but overall, we are okay. the question is this correction going to impact things here domestically and then the question is does the fed have the right moment now to raise rates? >> okay. andy, thank you for being with us. andy is the editor and chief at yahoo! finance. >> thank you. >> john, thank you. >> good to be here, thanks. coming up, holding china accountable during the market turmoil. we have more of steve leastman's

exclusive interswrut treasury secretary of the united states, jack almost ew and then reaction from squawk market master, steven roach, as we tap into his expertise on matters dealing with china, the markets and so much more. you're watching cnbc and you're watching "squawk box" as well. we are first in business worldwide. ♪ every auto insurance policy has a number. but not every insurance company understands the life behind it. those who have served our nation.

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u.s. markets rebounding, but buckle up for two hectic data days this could shake up stocks. the next 14 hours could be a game changer for the markets and the fed. breaking data and job predictions start now. >> a cnbc exclusive, treasury secretary jack lew on the events driving the global market turmoil. >> we have been clear a very long time with china how they

manage their exchange rate is a matter of great concern to us. >> his take on china's economic slow down straight ahead. new this morning, china's military on parade as the country celebrates the 70th anniversary of the end of world war ii. we will get a live report from beijing on the market and economic unrest. the second hour of "squawk box" begins right now. ♪ >> from the beating heart of business, new york city, this is "squawk box." >> welcome back to "squawk box", everybody this is cnbc, first in business worldwide. i'm becky quick along with kelly evans and scott wapner. joe and andrew are off today. we have been watching u.s. stocks rebounding, the s and p and nasdaq rallying more than a percent and a half. that was enough to pull them out of correction territory, believe it or not. the dow remains in correction territory though, down 10% from recent highs that comes despite yesterday's gain of almost 300 points that finally ended three straight days of losses.

check out the u.s. equity futures at this hour and you will see this there are green arrows across the board once again. right now, it looks like the dow features are indicated up by another 50 points. thesome and p futures up by seven points, the nasdaq up by 19. if you wounded what he we were talking about, golf or fishing, steve liesman's here and i am convinced that golf is not the king of sports, the sport of kings, it is fishing, because of the people that you get to get in close proximity, because you fish. >> yes. there are many people, many of them i can't talk about, but some of them like to fish and many of them say they can fish but then you go fishing with them and you find out that they talk a bigger game and maybe that's also true for the way they operate in office. >> wow. >> but -- >> fishing tales, so to speak. >> those who actually come there are some talented ones. >> i can't believe you're trash talking at this point. >> what's important is it's about the fishing, not the other stuff. and maybe learn a few things along the way. >> you reeled in a big fish today. >> yeah. yeah. >> get some more of that >> you want some more of that

now? >> no in a few. >> good. >> among our top stories at this hour, a busy economic agenda today. we get ecb's latest interest rate decision in about 7:45 a.m., 45 minutes from now. that's followed by a news conference by ecb president, mario draghi at 8:30. analysts say the ecb may have to consider new policy measures to stave off deflation. in the u.s., we will get the challenger report on august layoffs at 7:30 a.m. 8:30, jobless claims and international trade data, ism non-manufacturing numbers for august at 10:00. markets in china closed for a holiday today. japan's nikkei closed up a half a percent, snapping a four-day losing streak. meantime, over in europe, we will take a look in -- there you go, there is a look at the european market, green across the board. corporate news, the ceo of japan display hinting at strong orders from apple ahead of the iphone launch. am was never mentioned by name but the screenmaker's ceo said,

"his biggest client is increasing orders." the new iphone is expected to be launched later this month, kell. >> now, u.s. treasury secretary jack lew sitting down with cnbc's steve liesman with an exclusive meeting ahead of the g-20 finance ministers' meeting. diplomatic but hard criticism for the way china handled its recent devaluation. >> we started out, by global standards work a strong u.s. economy. i think china, for some time, has been slowing down. they had a double-digit growth rate that was fueled by heavy growth of industry and they have, for several years now, been in a transitional phase. the question is are they managing that transition in an effective and orderly way? i think that there's no question in my mind that the message we have given to our trends in china, one at a policy level that they embrace, that is there needs to be a set of reforms put in play, the economy becomes much more market oriented, where

consumer demand grows and there's a shift from a heavy, heavy emphasis on industrial spending to more and more consumer-driven spending. and i think that what they are experiencing now is the challenge of managing that transition in an orderly way. i think the really important question for the medium and the long term is do theft ability to stick to the reform plan that they have mapped out? and i think that what bev seen over the last few weeks are some moments of policy action that caused some people to question whether that is sustained. but i think it's actually broader than china in the sense that there's a question here about demand, worldwide demand being a bit soft. and while u.s. demand is doing well, it's not strong enough to pull the whole global economy forward and that's why one of the issues of the g-20 that we will be dealing with are actions that can be taken in china to reform and move toward consumer demand but other parts of the world have more emphasis on

growth and demand. >> if there's further devaluation of the yuan, would that give you concern that china is trying to depreciate its way out of its problems and do so in a way at the expense of the united states? >> look, i think that we have been very clear for a very long time with china how they manage their exchange rate is a matter of great concern us to and that they need to be willing to let market forces drive the value up, not just drive it down. that's message i have deliver vedder clearly. >> republican presidential contender donald trump says china's economic policies amount to the greatest theft in history. >> i don't need to look to the political statements to focus on the importance of the u.s.-china economic relationship it is enormously important relationship. it's one where china needs to understand quite clearly that we expect for them to behave in a way that's consistent with agreements that they have made where we expect them to behave in a way that meets a level of

transparency, where it's credible that they are moving to keep commitments that they have made. and they had to understand, and i make this point to them quite clearly, that there's an economic and a political reality to things like exchange rates and they need to understand that they signal their intentions by the actions they take and the way they announce them. and they have to be very clear that they are continuing to move in a positive direction and we are going to hold them accountable. >> i know you folks thought have been listening to officials like lew for a long time. there are a couple things going on. lew is saying what the u.s. has always said, which is china needs to have a market-oriented exchange rate. the other thing is the implicit criticism of the way they handled the recent devaluation. he is not the only one. i talked to several officials

who said china handled this badly before they ended up explaining it to the markets, pen is spent hundreds of billions of dollar these never had to spechbd the other thing i want to point out is the toiv language he used, he didn't take the bait on the trump question, however, the toughest language that he used was in response to the trump question. when we said, trump say this is the greatest theft, that's where he says, we are going to hold them accountable. so, there is this sort of brewing notion under -- in the political sphere, trump brought that up and made it a potentially big political issue. >> they need to allow market forces to take over, not just when things are going down but also when they are going up. >> right. right. >> what we have not seen from them is any sort of stability, any sort of rule of law, any sort of allowing markets to really operate freely, even when it doesn't do what you're hoping. >> especially recently. i will say just one thing, history was that the u.s., and i believe it began under paulsen and the bush administration and

continued by the obama administration, was successful in creating this modest appreciation of the yuan, okay? but now, they stepped in and essentially intervened in the market, to keep it -- allow it to devalue. that's the first thing. the other thing is that china, for a very long time, has made these market-oriented moves. all of a sudden, they get a big upset like this and they go and they arrest journalists and they harass people who are selling, that's the kind of thing that has long-term damage. and i think lew is trying to -- >> we should point out, just to make sure we are keeping track of our own issues, we banned short selling in the united states here at one point, too, during the financial crisis, so, we are not without our own flaws along the way. very different -- very different, but -- >> i agree. >> when things get really bad, it's hard to stay out of the markets. >> champing at the bit. champing at the bit.

nch>> so many directions i want go speak to the next of amateur hour in china. the inability, not only to manage the situation, but in many ways, make it worse in some respects. >> look, scott, they are not -- they did not do a great job in handling the equity market bubble on the upside by encouraging it and fighting it on the downside. he's points on the about face on the kur rehn circumstance the one thing i would correct you about steve, this was not a modest appreciate. it was un35% over a ten-year period. >> fair enough. >> backed off a little bit. but they have a big move in the currency, in part, because of pressure from abroad, including the u.s., but also to help stimulate consumer buying of foreign goods, which is part of their consumer-led reforms. i think the biggest thing that came out in your interview, the one that was overlooked here, not the focus on the currency,

but the shift to more internal, private consumption. that is huge opportunity for the united states. your previous guests from the port of long beach was talking about u.s. exports to china. that's our third largest and most rapidly growing export market. we want to grow as a nation, we have got to focus more on that rather than going back to this tired sort of anti-china campaign on the currency. >> the numbers of the ceo of the port of long beach throughout and this decline in volumes, are we witnessing the hard landing? >> i don't think so scott, i really don't. you look the imf released a comprehensive report on china and pointed out now for the first time that domestic consumption is contributing more to overall gdp growth in china than investment. that is a big shift. you couple that with the growth of the service sector and they are doing something on structural change that is very, very hard to do and normally takes a much longer period of

time than most economies do >> back at scott's question, because the guy from the port of long beach had an astonishing number and before i say what that number, i want to put it in context of a bevy of chinese numbers nobody believes. so here's a guy from the private sector essentially coming forward and saying, i got a number and that number is a 10% decline in shipments to china. now, we could go crazy here and say is the economy contracting in china? >> can i ver, if i 10% decline in ex-sports to china or ex-sports in general coming out of -- >> yes. >> i thought he said exports to china? >> i hit him on that in the green room, it was 10% -- >> to china. >> to china. >> why wouldn't i think that's what's happening in the chinese economy? >> again what is the chinese economy? >> who knows. >> got to figure out what you're looking a i like to break chinese economy commune two pieces, the old economy, which is more the industrial

export-led assembly and procession and then the new economy, which is more services and consumer led. if the imf's analysis is right, the new economy is now growing slightly more rapidly than the old economy, but the old economy is fall investigate sharply. and i suspect that's what -- >> is it possible that chinese economies actually contracting? >> i don't think so. no. >> what's the number then? >> they publish 7. everybody says the number is half that. the people who say that don't really have a shred of evidence to base that on. >> look at things like new electricity demand. >> electricity demand. >> people i have talked to don't usually have nothing to base it on but -- >> again, becky, they are using numbers that are much more aligned with this old industrial economy, which is contracting. the services piece, which is now at 48%, possibly as high as 50%, is growing much more rapidly and contributing much more to gdp. that's the infrastructure of a

new consumer. >> in steve's defense, i will add, the economy changed, the government fiscal agencies are really slow in catching up, we in america are really good at measuring our economy for 1952. we are like, i don't know -- >> a good year. >> you complained about this with our own productivity numbers. >> we are maybe, in some cases, five or ten years behind measuring the economy as it is now. so, that's fair point. >> even if china is not contracting, right, considering where growth has been and where the world order has been by virtue of where china's economy has gone, if growth is not 7, stay is 3 1/2 or 4, isn't the impact the same, it feels the same if it was contracting? that's massive -- massive slow down? >> a good point, scott. i mean, china the last decade has contributed about twice as much to global growth as the so-called advanced economies have as a group. so the world has relied on china

its major engine and global growth. even a slow down this year, the imf again, using their numbers, says that china's going to contribute a little bit more, not as much as it has in the past, than the advanced economies. if you want to cut that number in half, then the world economy, especially the splip chain to china, the resource economies, australia, canada, russia. they are in trouble. >> why the stock market session hib big the the turbulence that it is, because we can't figure out what real global growth is going to be, thus we don't know were stocks should trade. >> i get that but to the extent that stock markets around the world, and in this country, on a given day factor in the china crash landing scenario, i think those fears are vastly overblown and the markets are going to figure out that china has slowed, but it is not going in for a crash landing and that will present, i think, an opportunity for shares to re-evaluate the china threat.

big time. >> thanks for being here. >> thank you. >> interesting conversation certainly. steven roach. by the way, going to get treasury secretary lew's take on the iran nuclear deal and the greek crisis and that's coming up in the next hour, 8 a.m. eastern time. coming up, economic fears in china are taking a toll on american retailers. consumers cutting back on luxury spending. we will be joined next with how u.s. companies plan to weather the storm. then former dallas fed president, richard fisher, will tell us why he thinks a september rate hike is still on the table. plus, china's markets on a holiday, fears that stocks and the economy there are in a slump. we will get you a live report from beijing on what the conditions are. stick around.

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across america have benefitted. internet essentials is going to transform the lives of families. i see myself as maybe an entrepreneur. internet essentials from comcast. helping to bridge the digital divide. welcome back to "squawk box" everyone, we have been watching the futures morning and indicated higher all morning long. you can see now the dow futures indicated up by 45 points. this comes after a 300-point -- almost 300-point gain groerd the dow. you can see the s & p 500 up by six points and the nasdaq up by 18. we have been talking a lot of china today. china is the second largest market for slurringry brands in the world but fears looming about china's economy, consumers there are cutting back on luxury spending, leaving many of the western brands with unexpected challengings. joining us with how retailers are wlg the china storm is dana

tell circumstance the ceo of the telsey advisory group. thanks for coming in today. >> that us for having me. >> we know a big deal, which brands have been particularly hit hard? >> everything from prada excess of 25% of their sales impacted. companies like the watch companies also being impacted, giving gifting issues. what we have seen, the athletic companies doing well. nike's results in sales and earnings very solid there >> a lot of people we talk to tie this back to the crackdown on corruption. they say it was unbelievable how much gifting was being done and how much kind of graft was being golden gate through on these things, maybe that was producing returns that you just won't expect to ever see again. >> exactly. what we are see sag lot of these asian consumer, chinese consumers, they are showing up in europe and japan, some of the high rollers that used to be in hong kong and macao, hong kong and macao is now being advertised, macao particularly for vacation, for families, given the newer hotels and seeing the high rollers being

taken on private planes, australia or other parts of asia, because of the government gifting crackdown. >> it's kind of stung and you just wonder if that's the type of thing that some of those very high-end luxury brands can ever recover from. maybe we were just looking at false highs and this is the new rate and the way it's going to be. >> certainly feels like that end of june, i went to visit a bunch of those high-end luxury companies in paris and what they are doing is they are seeing those tourists basically come to europe, going to japan and also their stores, you may see them closing stores in china, not opening any more stores because the tier 2 and tier 3 cities don't have the same growth rates that they had in the past. >> that's -- go ahead. >> what about domestically and the turbulence in the stock market here? are you worried that that's going to eventually filter down to the consumer who is going to spend less as a result? >> of course. one of the things we have been seeing, you think about the high end and you think about flagship cities, here like new york, we are not seeing as many overseas tourists as we have it had in

the past. companies like macy's say tourism can be 5% of the sales, impact the comp buys 1%. saw tiffany's new york city flagship most impacted by lack of overseas tourists. so yes, what we are -- >> though that was a direct reflection of the stronger dollar. >> exactly. that cuts tourism here to the united states. >> exactly. >> how long do you model that out? a year, two years, three years? >> does it last for a year, a little bit more, it certainly seems that way. we will be lapping it by the beginning of 2016. you mentioned the american consumer. look where we've had the traffic gains, strong domestic companies. we have had companies like tjx and off price have traffickings in excess of 5%. cosmetics very strong category lately, companies like out ta saw 7% traffickings, look what you saw at walmart, still over a 1% trafficking, rare we have seen these traffickings. >> don't worry the september retail sales number could direct

lib impacted by what we have seen in the stock market here in late august? >> comps for sales are just coming out for the month of august today, right as we are talking, limited brands just reported a 6% same-store sales increase compared to the consensus number of 2%. that's better than expected. >> you wouldn't expect it to show up for the month of august, as you look into next month, people have felt an overwhelming amount of pain or just timidness and nervousness by virtue of the stock market volatility, wouldn't that potentially show up next month? >> sure, you may see a trade down, later labor day, i'm going to get more of the back-to-school spend in the month of september than what i have had in the past because all of labor day weekend happens in september this year. >> okay, dana, thank you so much for coming in. >> thank you. >> good to see you. >> you, too. new rumors out that steven spielberg may be parting ways with disney. details of that are straight ahead. time now for today's aflac trivia question. what animal has larger eyes than any other land creature?

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what animal has the largest eyes than any other land creech zmur the answer, the ostrich. >> i was chose. steven spielberg may be parting ways with disney, according to new reports. spielbergs dream works studio not renew its distribution deal with disney when it expires in august. disney has two more spielberg films to release before it runs out, including cold war thriller, bridget spice and as dapation, bfg. >> makes you wonder where he will wind up next. when we come back this morning, former dallas fed president, richard fisher will join us to talk about rate hike timing and global market turmoil. look at the equity futures, still green arrows today, dow futures up by 40 points,some and p by 5. "squawk box" will be right back.

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welcome back to "squawk box" on cnbc, first in business worldwide. among the stories front and center this morning, campbell's soup posting quarterly earnings

a penny ahead of estimates. revenues came in in line. we are hearing from medtronic this morning, earnings and revenues beat the seat and pimco's flagship fund posting 1.8 billion in net flout youth flows last month, still less money was pulled from the fund in the previous month. kell? just a day away from the august jobs report, a biggie. we have some data breaking right now that shows august job cuts plunging more than 60% after surging to that four-year high in july. let's go inside the numbers now with john challenger, ceo of challenger, gray and christmas. john, eager for any scraps you can give us here to gauge tomorrow's jobs report. saying many fewer layoffs last month, right? >> layoffs were down certainly from july, which was a four-year high. and in fact, down from the monthly average this year of 54,000 the 41,186 we saw in august was a good number. it was up just a little bit from august a year ago by 2.9%. >> remind us what was going on in july, was that the energy

space? >> it was actually big military cuts that pushed that number up above what is really going on in the economy, which is a low -- there's low pressure for layoffs in most sectors, unemployment's low, companies more are looking for workers. >> are you doing just private sector worker or is this public and private? >> no, it's public and private companies. this month, led by retail, saw big store closures by a & p, big old brand company. we also saw earlier in the year, the closure of a lot of stores by the retail sector by radioshack. so, what we are seeing i say this a lot of pressure in that consumer product sector, think about what's going on with 3 g and kraft and hypez to bring down prices, especially companies with old brands. we are seeing some real pressure, pricing pressure in that sector, leading the layoffs.

>> a secular one trying to gauge the strength of the job market generally. the 41,000 total job cuts announced last month, the lowest since when? >> well, don't have that number, but i would say that we have seen seven of the eight months this year with higher numbers than we saw last year at the same time. they are not up significantly, but we could see if we continue along this pace, 650,000 layoffs this year. that would be the highest since 2009. so, there is more pressure right now in the economy. that's kind of surprising with unemployment so low. usually, you see the opposite, but see companies taking actions right now despite what's going on in the economy. one of the factors that's led to a lot of layoffs this year is the drop in oil prices so manufacturers are cutting jobs, we saw u.s. steel, for example, close a plant in birmingham or at least cut a lot of job there is, old glass furnace. >> go phillips, too.

>> made pipes. >> this fig your i think might grab people's attention, on pace for 650,000 layoffs this year, which would be the highest since 2009. how much of that is the military? in other words, how much of that should we kind of nut a separate bucket from maybe what's happening with the business cycle? >> military had some big cut bus not a big part of really what's going on. we are seeing kind of steady layoffs, up from last year, that number, highest since 2009, still is not a big jump up. so, again, 54,000 average in layoffs is the kind of pressure you see in a normal economy, strong economy, companies are always laying off people. so, i don't think this is a sign yet, any harbinger of a recession is just sitting on the horizon. >> okay. and yesterday in the beige book, which reports all those different federal reserve districts talks about conditions, the labor market readings were pretty strong.

they talked about tightening -- shortness in workers in several sectors, tech being one, truck drivers, et cetera, even some signs of wage pressures, does your survey indicate some of the same things going on here? >> we do see real strength in the economy. it seems like other than retail and manufacturing, which is a lot of oil-related kinds of cuts, energy, the economy is very strong. most companies are holding on to their people. we are seeing on our job search side that search times are down, seeing search times averaging just over three months now, that's sign that employers, not just in those areas of highly skilled jobs, but in those medium-skilled jobs as well, are looking for people as the revenues continue to be strong. >> all right. well, we will keep a close eye on the energy sector and retail, too as you indicated, john, thanks for being here this morning. thanks for having me much

appreciate it. the european seine central bank set to announce its latest rate decision, we bring that you news in a few moments. first, former dallas fed president richard fisher joins us to talk china, interest rate hikes, a whole lot more. stick around. can a business have a mind?

a subconscious. a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit? can a business have a soul? can a business be...alive?

welcome back, everybody, u.s. treasury secretary jack lew having choice words for china when it comes to handling the yuan's devaluation. he sat down for an exclusive interview our own steve liesman. stlnchts an economic and political reality to things like exchange rates that end need to understand that they signal their indexes by the actions they take and the way they announce them. they have to be very clear they are continuing to move in a positive direction and we are hold them accountable. >> joining us to weigh in on the china story and whether it could play a role in determining the fed's in ex-step richard fisher, the former president of the bank of dallas and former deputy u.s. trade representative and cnbc contributor. thank you so much for joining us today. this is something we have been kicking around and around. i haven't gotten a chance to talk to you since this chaos broke out in the markets. how does this change things for

the fed? >> i don't think it changes very much because our domestic economy is very strong. i think people come around to that the economy is strong in the united states. in terms of the direct impact to china, exports to china represent about 1% of gdp. we do benefit from the goods that are coming out of china being cheaper. that's where we have a positive impact. the real impact on china is region. i think we overhe reacted, markets overreacted to a small movement in the direction of liberalizing their account a little bit and allowing the currency to trade, we have been begging them to do and the imf begging them to do on a more free trading basis, although severely constrained. the slow down does impact, you can see japan's ex-sports, too,

korea's exports, tooen report this week and there's an incorrect impact. the reaction will be domestically centered, the numbers are good, inflation per stan fischer who is the most senior official to speak recently, the vice chairman of the fed, the second most important person on that economy, pointing out the dallas trim mean is raungt -- running at 1.8%. he wanted to get ahead of the 2% curve.

an emphasis on output and volume to an emphasis on profitability and quality. this is what needs to be engineered. the easy job released masses of labor. but now they have to make that final transition that is a hard thing to kind think a lot of disruption in the meantime. >> take china out of the picture and look dom messically. i know the stock market is not the main priority for the fed, not even their second priority. i do know that it enters the conversation. you have been at the table, seen how this goes around, do you think those sitting at the table say maybe we wait another month or two to see how this shakes out with the volatility in the stock market because we don't want to add fuel to the fire? >> i and others to match, others at the table, reminded the economy that the market has tripled since the march low of 2009. there were bound to be corrections. don't go wobbly on a correction.

don't dornt couldn't don't confuse what's happening in the market with the economy. the fed is geared to the real economy. in 1962 and 1987, we had severe corrections, a very long correction, the economy continued to chug lining. so, if they are indeed if they have worries about what happens in the market tonight, i think tend cates, a, they don't understand how markets work, most are ph.d. economists, and they think there's a direct correlation. there might be, there might not be shall the underlying real economy is strong, as many of your people that you had on this morn having been arguing. no one wants to create enormous volatility but that's one of the reasons i think that chair yellen and everybody has been talking about this constantly, a move that's been discounted, whether it's september or december, i see no reason personally, setting aside my own views, but looking at the real economic numbers for hawks or

doves or anybody in between to want to delay this beyond september or october. >> hey, richard, you are a smooth talker and you understand the economy and markets inside out. but aim correct in kind of surmising but what just said, basically in they don't do it because of the stock market, then they are stupid because they don't understand the markets? >> none of them are stupid. they are all hyper intel xbrent. i was the dumbest -- dullest knife at that table. ligent. i was the dumbest -- dullest knife at that table. they are not going to be this driven by what's happening in the real economy but instead driven by what happens in the marketplace. and that's not the purpose of the central bank. the purpose of the central bank is to do what is best to achieve full employment and keep inflation at bay, they are doing it well now. >> mr. fisher, it's scott wapner. >> hey, scott. >> the words quantitative tightening have been mentioned by some very smart investors of

late and it's the notion that we knee china is selling some of their reserves. and the concern there is that that, in and of itself, is going to force u.s. interest rates higher. how does that factor in, if at all, to the faed's thinking and the thought that the chinese, by virtue of doing that are doing some of the fed's work for it and maybe that that will ultimately impact the board's decision. >> they have $3.6 trillion in excess serves, whatever numbers being bandied about are small, relative to the total. a. b, if you look at the ten-year, still trading where is it today, 217 or so i don't have a screen in front of me. but -- >> yields haven't moved. the ten-year -- >> yields haven't moved. i would think yields would move if there was a genuine concern about this put into context of a

huge pile of reserves. and i don't lose a lot of sleep over that. i don't think -- nice little handle. everybody is looking for an excuse does not have the fed move. why? because money's dirt cheap. makes their job easier. they don't want to have to work. >> there's also the notion -- bill gross made t >> gross talks on book. however he is positioned is what he wants to say. that is natural. he is great human being, by the way and magnificently successful man but all these people are pushing their own positions, typically and bill is one of the best at t and there's really very few people that are better. >> isn't it a fair criticism, at least, that the fed had an opportunity to move and now it's just become much more tricky, not only because of what's going on with the turbulence in our own stock market, but greater concern about what's happening in china and the spillover

affect into some of the emerging markets itself? >> you are talking someone who advocated moving quite some time ago in anticipation of the stronger economy that we now have seen in the numbers, especially the second quarter numbers that were so strong. in a way, you are talking to someone who is part of the choir. having said that, the longer you wait, the more you talk about it, the more focuses on central bank policy and central bankers should be like dentists. they should be people you only go to when you really need to you really don't want to invite them to a cocktail party, no offense to dentists who are watching. but the fact is now the focus has become more and more intense and i agree with one of the former vice chairmans, just get it over. 25 basis points will leave still massively accommodative monetary policy. no one expects, including me, that they will move in sequence. it will not affect the real

economy, although it might help with it interest margins for bankers who want to go out there and lend money. all bankers i know want to see a rate increase, big or small. so i think that's really the key drivers here. i do agree though that we missed an opportunity. that's history. the question is what do you do next? >> we should point out -- >> the more the focus gets on it the more people get nervous about t someone earlier on the show used the term fedphobia. that's not where the fed should be. >> we should point out, speaking of central bankers, the ecb has left rates unchanged, as expected. richard, point out what's next. i just wonder if you think that at this point, you're actually going to see the market breath a sigh of relief if they just get it out of the way. >> i think so i'm just one opinion of a former marketmaker who happened to serve -- market operator who happened to serve on the fomc. i believe this is as cat withly

discounted. i would like to take the pressure off of the fed, put it back on the fiscal authorities to get their job and act together. i don't like and i don't think it's healthy to have this excessive focus on central banks or fed phobias, central bankphobias described earlier by one of your quite wise interviews. >> rich charged i want to thank you so much for your time and your wisdom on. this we will talk to you again soon. >> okay. thank you. when we come back this morning, we will be talking more about central bankers. ecb president, mario draghi, will begin his news conference in the next hour. we will bring you those highlights as they happen. right now after a break, here's what drew mattes told us yesterday about his favorite economic indicator to watch that happens to be coming this up morning. >> my favorite variable is claims. even the government can add 50 numbers together.

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about world war ii was it? it was a showcase for china's military might, it was a celebration of nationalism and a celebration of the communist party. so, among the chinese people, it played pretty well, there was a lot of national pride on social media being played, people tweeting and saying we love the mother land and so on. i think in the region and the world as whole, it doesn't go down so well. i think a lot of people are worried about china's aggressive foreign policy. we saw people like putin there. we saw the president of kazakhstan there and a few other nations but we saw the western leaders staying away. and a lot of asian leaders staying away as well. playing so well at home doesn't play so well abroad. >> how did this move to reduce troops by 300,000 play and what's that really all about? >> well, you know, that's about the modernization of china's military. china's -- china showed today a lot of very modern weapons.

it wasn't able to show its naval capabilitieses, which are growing rapidly as well, spending more on weaponry, spending more on the navy, spending more on the air force, it's not just about weight of troops anymore, it's about sophisticated, modern weapons, so trimming the troops, i think, was presented as this is a sign of our commitment to peace. really, it's about building a modern, strong military that can fight bars. >> and what do you -- speaking of what these things are all about, the ships that were up, spotted in the bearing sea, a general report, the pentagon keeping an eye on them, chinese ships haven't been reported in that area previous slick, that giving a lot of talk back home? was that supposed to be a subtle ad to all of this display? >> well,s rk, it's very hard to out what that means and i think people in washington are trying to work out what that means, the big picture here is that china's

navy is turning from a navy very focused on its own territorial and near waters to a blue water navy that can spread around asia, around asian waters, around asian pacific waters and ultimately further even than that toward the indian ocean and further on. so, you know, this is about china becoming a global power. this is what today's narrative was about. so you know, i don't know why those -- those ships, those vessels were there today, whether that was linked to president obama being in alaska, whether it was linked to the military parade, but it is part of a narrative of china becoming not just an asian military power, but i think a global -- ultimately a global military power. >> i also wonder to what extent this does make the leadership more predictable, the economy struggling a bit here, definitely seen the markets collapse, the measures they have taken in the wake of that have been nothing short of extraordinary, the timing of the parade was obviously long in the

coming, but as far as it goes these displace of ships and other waters, et cetera, is this meant to distract a little bit and deflect some of the criticism this make the leadership less predictable, especially on the political and military front? >> well, you know, the thing -- the funny thing about this here is that a while ago, we thought that china's communist party leaders kind imphalable on the economy, do they have the answers for china's economy and people around the world have seen the way they reacted to the stock market co-lapse, the way they znd didn't handle the yuan devaluation particularly well and begin to wonder whether they are imphalable. they are seeing the slowdown in china's economy and they are not seeing reforms that everybody expected, that the government promised. so on the one hand, you have seen that. on the other hand, i mean, this military parade, it was a distraction from the economy, from the economic words? some extent, yes, but it's also a gloss rick faci-- gloss rick

making the top leader look good, making him look good, the party look strong. they are hoping that his state visits to the u.s. in september, later in september, will also make she jinping look strong to president obama. >> they round up journalists, made that one business journalist confess on television to adding to the panic. how is this affecting the "washington post" and affecting you, simon? >> well, the a he is not affecting me. i mean, we've had -- we are able to have our visas renewed. we are restricted from reporting around the country very often when we go outside it is very difficult to deal with local officials. the latest affair, the latest stock mark collapse hasn't had any direct effect on us but we all look at this, we look at the chinese media being scapegoated. we look at prominent journalists and it's not just this financial

journalist being arrested. we have seen several prominent journalists arrested in the last year. so we see the space being closed down for the chinese media and that's concern for all of us and that means that information is harder to get. there's less accountability in the system. it's a sign of china closing down and that's worrying when we look at t. >> thank you. it is. simon denyer, the china bureau chief of the "washington post." thank you for your time. when we come back, analysis from a noble laureate on the market turmoil. these two oil rigs look the same. can you tell what makes them so different? did you hear that sound? of course you didn't. you're not using ge software like the rig on the right. it's listening and learning how to prevent equipment failures, predict maintenance needs, and avoid problems before they happen. you don't even need a cerebral cortex to understand which is better. now, two things that are exactly the same have never been more different.

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this isn't lactose. it's milk. ♪ professor robert chiller of yale tell us why he thinks the dow could be heading down to 11 thurkd drop of 5,000 points and where we are today.

the details behind this bold call coming up. don't underestimate disney's force. the mouse house rolling out a flood of toys and merchandise for its eagerly awaited "star wars" flick, the force awakens. what does force friday promise and how are companies like disney poised to profit? the final hour of "squawk box" and the force of wall street begins right now. >> we're home. ♪ >> live from the most powerful city in the world, new york. this is "squawk box." welcome back to squawk box, everyone this is cnbc, first in business worldwide, i'm becky quick along with scott wapner and kelly evans. we are about 90 minutes away from the opening bell on wall street. futures this morning, have the force with them. you can see right now, dow futures indicated up by 47 points. s & p futures up by 6 1/2 points, nasdaq up by 19.

this does come after a strong day for the market, yesterday. check out what happened -- what's happening right now in the markets in europe, you see green arrows there as well. looks like the biggest gains coming from the dax of the major averages. here are the stories insleshs talking about today ecb holding key interest rate unchanged. president mario draghi will answer questions from reporters in the next half hour. the imf is urging the world's leading central banks not to raise interest rates in an agenda-setting note ahead of the g-20 meeting, the imf argues the performance many of the major economies is falling short of expectations. the fund calls on the fed to remain data dependent and not take hasty action. tomorrow is jobs friday. ahead of that government report, staffing company challenger gray and christmas reports job cuts plunge 61% in august after rising to a four-year high the

previous month. after iran complies with the nuclear agreement, we will have

sanctions in place to address terrorism and global destabilization. i think the challenge we have is to make that clear so that no firm is out there doing business and saying we didn't know, we thought because there was a vote, you know, the coast was clear. iran will not be free from these sanctions until they comply. and that's -- we don't know when that -- >> europeans out there already out there jumping the gun? some concern about that? >> i watched this pretty closely, i see trips to iran, european business and some ministers and to my knowledge, all they have been having is kind of conversations, opening conversations. i have made quite clear to them that any company that does business in the united states is subject to u.s. law and we are going to be continuing to proceed with the enforcement of sanctions until we get to the point that iran has complied. so i actually don't think that we are in a place where business is being transacted in i'll t i

there maybe desire for some to be first in the door having real conversations, that's their judgment, but to the extent they think the sanctions are lifted, they need to be aware it requires iran taking all of the steps to shut down all four path twice a nuclear weapon before those sanctions are lifted and they still have to be cognizant of the remaining sanctions for other purposes. >> when it comes to the question of greece, is -- do you have concern that the imf may not be involved? >> the debt sustainability review is one that is an essential part of their decision to participate. debt rae structuring fits into that. and i'm certainly hopeful that there will be a debt restructuring agreement that gives the imf the ability to have a positive conclusion to the debt sustainability review. i can't speak for the imf. i think the imf played a very

important role to that the issue of debt sustainability is very real. one an agreement on a leaders level to have a serious engagement on. obviously, a timeout now, as there is a greek leeks but it will be october before we blink. >> he said he can't speak for imf when it comes to the greg deal even though the united states has a big say in that. folks, this idea about jumping the gun, we have all been that there and seen this when it come t comes to some of the sanctions lifted, feels the europeans get in there on the plane before the ink is dry in the deal, making deals. um hear this big energy company from france or spain signing a deal before the americans seem to be there and they seem to be, no offense, a little faster and looser with some of this stuff. >> behind the scenes pushing it much more aggressively.

>> think the reason why we are where we are, we weren't able to hold coalitions together to keep the sanctions in place. i have covered sanctions for 20 years against -- the only way they work is when everybody is involved and you have a ring around the entire country. >> al dershowitz is going to join us. >> he will disagree. >> any time you tie it back to the companies might miss out, it sounds like you are making a finance argument instead of a security argument. i understand your point sanctions don't stand without a united front. also people who said, wait a second, why are we talking about the financial considerations when what we should be focused on is security? >> i have also and i'm sure alan has an opposite of this, they have idea of business as a way

toward peace. and when i was in russia, the only aid programs we ever -- that ever worked were the ones we brought russians back to america and where russians engaged with americans on business issues much the iranian people are very, very different, from what i understand, from their leadership. engaging in that regard on business and commerce is the way to make the world a better place rather than this constant, we are going to shun you. >> you think exxonmobil really wants to be -- in go in there, peace brokers, rather than looking at the -- >> no, exxonmobil should go in there and look at the almighty dollar and do their business and the fallout from that process i have seen in my travels around the world is a better one. >> you just said these sanctions were some of the most effective you have seen. you can't have it both ways. >> um, sanctions are. they did bring iran to heel. i think mr. dershowitz does not believe they brought them enough to heal.

the conversation different from it was with iran years ago. >> thank you for all the coverage from secretary lew this morning. >> back at 8:30 with ecb president. looking whether they change their inflation forecast and that has implications for how long they do quantitative easing. >> expand it. >> or got other watch seems like europe is stable to even growing a little bit. >> spain, how about that economy, scott? seeing it firsthand, gdp. >> i love spain. >> almost almost 60. >> i was in barcelona and i was very hint spanish economy from barcelona. people said i should have gone to madrid and had a different look at the country, but barcelona a happening place. >> were through? >> i was there. last week. >> they are doing business barcelona. >> now we know why they are booming. thanks for calling. >> steve, thank you. see you in just a few minutes. the meantime, watching the markets, this morning, it looks like they are taking a positive open and taking a positive look at things. of course the dow remains in

correction territory for right now. our next guest says that it could fall even further. squawk laureate robert shiller economics professor at yale university and co-founder of the case-shiller home price index and the all the over the best selling book "irrational exuberance." professor shiller, thank you so much for being here. i know you have been looking at this for a long time. it's the cape readings that you look at, the cyclicly adjusted price earnings ratio that has you concerned about valuations, even at these levels. why don't lay that out where we are on an historic business. >> the cape ratio, monthly cape ratio reached a peak of 44 in the year 2000. and that was followed by an important drop. went to 27 in 2007, followed by another drop. and then we were recently back up to 27 again. it does seem to forecast some what it's not reliable, but

warning signal and we have been -- we are still, the cape ratio right now is around 25. it's high. >> walk me through exactly what the cape ratio measures again. i know it's cyclicly adjusted. it takes a look at earnings over how long, ten years? >> ten years. yeah. that's much longer than most business cycles. it averaging out of the business cycle, the average price ratio is misleading because earnings can drop precipitous any a recession and they are volatile from year to year. we just take a long average. it is not a new idea. you find the beginnings of this in graham and dodd in 1934. it's been mentioned over the time but never become a standard it should be a standard it is a standard valuation for the whole stock market. >> based on those valuation though, if you look at a cape index of 25 now and realize that a 17 has been the historical average, that gets to you where on the dow and the s & p, if we were to fall back to a 17?

>> something like 11,000 on dow and 1300 on s & p 500. quite a bit lower. quite a bit lower, a lot of pain between now and then. and you point this out, but you also caution that this is not necessarily something that the market will revert to instantaneously. . right. >> and stock does go higher from here, too. >> they can go a lot higher. i just mentioned that cape got up to 44. even higher on a daily basis. so we i think? a risky time. a risk of substantial key dee kleins as well as -- i'm sorry, i can't do better than that >> in terms of how you behave yourself based on this, and obviously, nobody can time the market perfectly, but in terms of what you're doing yourself, have you taken money out of the

stock market? >> yes, i don't take myself as a model for everyone else. people are different they have to look heart own risk situation. but this advice that one should not react to a stock market drop like we've seen in the last ten tires so is a little bit misleading. maybe someone's goodwill effort to stabilize the market and tell people not to overrear act. one shouldn't overreact but the market is high now. and people have to look carefully. you know, maybe this recent turmoil is making many people think that this is a time to look that the their holdings and see whether their exposure to the mark sit right. some people are surely overexpose and ought to reconsider. >> having stayed this though, we do talk an awful lot about the millen yas ant millennials for large part, again, a third of the population, so, hard to not talk in broad strokes of

judgment here, many of them reluctant to get into the stock market, grew up watching what happened in 2008 and 2009. having said that, would you tell people of that age not to at least start thinking about stocks and start thinking about it as a way for retirement? >> interesting, if you ask for that age group, there was a recent book that said, hey, people, this is a few years ago, but, hey, people in that age group should -- they should be buying margin, they should beself rajjing up, because people in that able group can afford to lose money, you know, they have got years of earning ahead of them. that would -- actually somewhat appealing thought to me except for the situation we are in right now. >> so maybe they ought to reconsider, consider buying stock on gosh >> i don't know a good idea for most retail investors. >> this was a con strollers

book. i'm saying found it interesting. older people shouldn't be leveraging themselves up. older people living on retirement, i think this is a dangerous time. >> professor share, thank you for being with us today. we appreciate your time. coming up, iran's top leader says sanctions must be lifted if the u.s. wants to get a nuclear deal done. we talk sanctions, iran and u.s. policy next with harvard law professor, alan dershowitz. check out the futures at this hour, pointing to a gain off the open this morning for the dow of 71 points. looks like the futures are at the highs of the morning right now. we are back right after this.

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welcome back to "squawk box". with the announced yes vote of senator barbara mckulski for the iran deal, the obama administration has enough support to survive a congressional vote of disapproval later this month. just this morning, we are

hearing from iran's supreme leader who says that sanctions should be lifted and not just suspended. if not, then we will only suspend our nuclear activities and there would be no deal if the sanctions are only suspended. we are joined this morning by alan dershowitz, harvard law professor emeritus, his new book is titled "the case against the iran deal." thank you for being here. >> thank you. >> this is a situation where we have in the last couple of days seen enough votes to say the president will get this deal passed regardless of whether or not congress wants to go along with it. what do you think about it? >> very questionable under democratic principles that a deal should be able to go forward with one-third plus one of one house of congress. the american people overwhelmingly opposed or at least critical of the deal. but the deal's going to happen. le question what do we do to stop iran from developing nuclear weapons, i have a proposal that would help at least ameliorate the situation. that is for the president to be

given the authority to implement the deal through whatever means necessary. tom friedman made that proposal, other made that proposal, i think we have to put some teeth into the deal at this point. we don't know exactly what the deal says that's our problem. we are buying a pig in a poechblg is it a ten-year deal? the president when we first announced it said we can stop them from getting nuclear weapons in ten years, we have succeeded, then he stayed is a forever deal, maybe a 15-year deal. we have to know what it is that is in the deal and also have to know why the president gave up 24/7 inspection and allowed 24-day inspection. what are they hiding? are they intending to cheat? i think this deal nation more likely that iran will develop nuclear weapons. >> the details you are talking about are not going to be changed. in terms of the 24-day inspections, some of the other issues that happened, tom friedman was here and he is right saying he thinks this is a deal that goes hand in hand with the president being allowed to enforce it and being given military might to enforce it tom

says he is in favor of this deal. >> reasonable people could be on different sides of the deal. i would be in favor of this deal, too, if i felt that it was forever, if i got an assurance that this is a statement iran will never be able to develop nuclear weapons that we will enforce the deal through whatever means necessary if iran cheats and tries develop nuclear weapons. right now, i'm opposed to the deal 'cause i don't know what it is. we have heard everything. for example, you had on your show this morning secretary lew. he is a terrific guy and loves america and is very supportive of the deal but tells us sanctions will remain in force, whereas secretary kerry said the sanctions are dead. the sanction regime is over. we are hearing both sides of this argument. can the sanctions actually still be enforced? can we have snap backs? i don't think so. i think the sanction regime is dead. i wish the president had started the negotiation by saying to the iranians, look, you will never be allowed to develop nuclear weapons. we will stop you if you try.

now let's negotiate away your sanctions in exchange for a complete giving up of your nuclear program. he didn't do that he negotiated with them as equals and the superpower should never do that. >> fair point. but that's all behind us now. >> i know. >> and moving ahead, is there something that -- would that be enough for the president to be able to enforce this with military action if iran cheats, because frankly, i think a lot of people expect them to go ahead and cheat? >> we need a deterrent effect and we needed two things, thirst of all, israel to be given bunker-busting bombs so that if iran cheats and is on the verge of developing nuclear weapons, israel has the power to defend itself. one those will never have to be used. but as george washington once said, the best way to prevent war is to make your enemy know you're ready to wage it. and we have taken that military option off the table. the iranians do not believe that president obama would ever use the military option. i think that makes war more likely rather than less likely. >> to the pushback of, look, you

can add 50 layers of teeth to this agreement and yet, there's no guarantee that iran will never be able to build a weapon and there never -- there never is going to be a guarantee, no matter what. >> don't live in a world of guarantees. >> always to your book, always going to be a really of the dice, but one that's worth taking. >> that is question. to me, the analogy is more russian roulette. only a one in six chance you blow your head off, none of us would play that i think we are playing russian roulette about our future and future of american allies, a one in six chance it could have a catastrophic outcome. it could have a good outcome. i agree it is a roll of the dice. i don't think we should be rolling the dice with the security of our allies and ourself. >> do you believe commerce can lead to peace, iran, the case of cuba, seems to be imp police sit in what the administration is doing? >> yes, i do i think commerce is a good thing. i think dialogue is a good thing but it has to be backed by the military force of the united states. we are a superpower. we shouldn't give up that competitive advantage. we shouldn't allow iran ever to

negotiate with us as equals. i'm a criminal defense attorney. i negotiate all the time with prosecutors. they never give up their advantage. they have all the power. tell me my client is going away for ten years or gave years they can don't tell me that i have the opposition of my client going free. i have to always negotiate from a position of weakness. i do the best i can. but i never am equal. and the united states shouldn't have allowed iran to develop a situation where they, the inventors of chess, are playing chess against us while we are playing checks and i'm afraid that the ayatollah's outmaneuvered on the check board, the chess board. >> al, some of the biggest concerns are what happens in ten years and if we are now legit mizing the nuclear program in iran in ten years what does that mean? >> i want the president to look me and the american people in the eye and tell us, does he believe that under this deal, iran can begin to develop nuclear weapons in ten years? i don't want to hear about the nuclear proliferation treaty, they can get out of that instantaneously and what the

president has been talking about. i want to know whether this deal is a green light for iran to develop nuclear weapons in ten years, yes or no, mr. president? tell us before we decide to go down this path. >> what do you think about the other potential options, a deal or no deal? because the president made the case that no deal is a worse scenario and we are less safe as a result? >> looking backward, i think this negotiation produced the situation where the options are worse and worser. right now it's unclear whether rejecting the deal would be better or worse than accepting the deal. i think we need a third way. i think we have to now turn our attention to how we turn this deal into something more positive. we all share the common goal, iran should never, ever, under any circumstances, be allowed to develop nuclear weapons. let's go forward now and make sure that issed implication of the deal, not a ten-year postponement. >> you said yourself, don't believe the iranians that president obama would ever enforce this militarily.

>> that's right. >> we are looking at another presidential election next year. who do you think is in the best position to protect the interests of america? >> it's hard to tell now because republicans are all posturing, it's size when you're out of office to say i'm in favor of the military option, not in favor of the deal. i want to hear when we get close to the leeks, i want to hear a presidential candidate say that policy of the united states is never under any circumstances will iran ever be allowed to develop nuclear weapons. it's a game changer. too dangerous for the world. that's the candidate i'm going to support. >> what do you think about hillary clinton's position on this, since she was the secretary of state? >> she wants to look forward. and her forward-looking approach is to present iran from developing nuclear weapons, we will get more specifics, but i'm a liberal democrat. i like hillary clinton. i have known her for years. i'm in her camp. but my vote can never be taken for granted ever. >> well, alan, i want to thank you very much for joining us today you make a very convincing argument, the case against the iran deal, maybe the argument that now we have to figure out the best way going forward.

>> thank you for the opportunity. >> thank you. coming up, the data point of the day, jobs in focus as investors are getting ready for tomorrow's big jobs report. after the break, we will give you a big key please of the puzzle, the jobless numbers. the dow up 61 points over fail failure at the moment, s & p 7, nasdaq 20. we will be right back. turns romantic, why pause to take a pill? and why stop what you're doing to find a bathroom? cialis for daily use, is the only daily tablet approved to treat erectile dysfunction so you can be ready anytime the moment is right. plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess.

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welcome back to "squawk box." breaking news. yes. july trade deficit, initial and continuing claims and of course, we are going to have mr. draghi's press conference shortly, 282,000 initial claims. that is down an even dozen from a slightly revised 270,000. if we look at the trade balance for july, we were expecting the number in the camp of 42 and change. a bit smaller deficitism should say it is trade balance that happens to be a deficit. the number is minus 41.86. so a little larger than minus 41 billion. and historically, how does that figure out? well, our loews read, 37 billion in february, highest read in march at 50.5.

not bad. in the lower third. lot of volatility in the dollar, effects by multinationals. more confusing to make this just a black and white issue only the value of the dollars, there's been so much readjustment, recalibration and of course, people still talking about challenger as we continue to get layoffs. we continue to get better numbers out of europe. but a lot of this may be old news, considering some of the equity shrinkage over the last several weeks, but we will look forward to hearing from mario draghi. looks as though the euro currency is very close to unchanged, more a question of qe. we should question his questioning of doing more. kelly, back to you. >> rick, thank you. our steve liesman joins us now with more reaction to these numbers. steve, the desert island indicator, jobless claims, up a little bit last week, the survey week for payrolls happens the second week of the month here. anything here alarming to you? >> no we are still in that

change, which most economists would say is consistent with a 200, 250,000 print number. the claims have performed remarkably well throughout this whole thing and the trade deficit looks to be in line, i believe, with forecasts here. exports rose in july, a good sign, we have seen the affect of the stronger dollar on u.s. exports. >> just heard from the ceo this morning of the port of long beach, exports to china, numbers that would you think would show up in the latter month anyway than currently. i just wonder what that whole dynamic could mean for gdp. >> exports bad for gdp lines, with big import, the primary way the stronger dollar ends up hurting us, not the main show in

town, right? many countries in the world, the u.s. has the smallest share of gdp, coming abroad and involved in trade, the u.s. is an island unto itself. the july figures, maybe august shows more of an impact in the numbers. ity. sm survey was weaker on the export fund. >> the weakness in ism came in part, from the export sector this is something the united states economy is going to have to deal with, stronger doll, what exports overall what we have in its place, better consumer spending and we have better housing market, those things seem to be surging at the moment and somewhat offsetting, the drag from energy and exports. >> futures not too upset. dow lactose open at session highs, 88 points above fair value. >> adp yesterday a touch light. >> a touch light. jobless claims which were a bit heavier. >> yeah. yeah. whachblt is the expectation for tomorrow? >> 220, i believe.

yeah. >> how does that factor into the thinking? >> it could come in -- it doesn't. it doesn't. the end of the day, what we have is this range, comes in within 30,000 of either one, a pretty good day for the forecasters. if you forecast 220, comes in 190, 250, you have done pretty well. the ability to forecast -- you think of this like on 200,000 number, you missed by 20. >> yeah. >> no. there's 135 million employed americans. so, you're plus or minus 20,000, that's pretty good number. whafrnls is the margin of error? >> plus or minus 90 -- i think the 95% confidence level somewhere around 90 or 100,000 so, 200,000 meets 100,000 or 300,000 and you're good on that. >> can we get the benchmark revisions tomorrow as well? >> i don't know, do we? wonkier than i am. i will get to that later. gonch to the cme now, scott nations is the chief investment officer and president of nation

shares, cnbc contributor. scott, good see you. so much volatility lately, you can react to the data this morning if you want and perhaps a look ahead to tomorrow and how it all sort of -- that narrative all place together where you think the market is going to go from here. >> you can also thank god that china is going to be closed for a couple of days so we can pay attention purely to our data. it's interesting that the correlation between the s & p 500 and shanghai composite stands about 35% right now. and this is the first time in eight years it has been above 30. so our market is being dragged down, maybe unfairly and maybe too far, by what's going on in china. we talked before about the fact that last tuesday, the s & p relative shrink index closed at 17. below 30 is considered oversold. below 20, the technical term is really oversold. we were due for a bounce. now, at 40. i think for the next couple of days, going to pay attention to our own knitting. i disagree with steve a little bit in that i think a really strong non-farm payroll number

bob better than a weak number would be bad the real thing to pay attention to is average hourly earnings because of the beige book from the fed. we get an uptick there, people who are starting to look for inflation are going to see t. >> well, so, since the data came out some five minutes ago, the futures have doubled, okay? the dow looks like it would open by 155, 160 or so. what's the message there, you think? >> i think it's thank god china's closed for a couple days and we are going to pay attention our own market. unfortunately, when we open next tuesday, we are going to be right back in the same -- in the same mix and we are going to have to pay attention to our markets with one eye and the chinese markets with another eye and the problem here is that the problems in our market are not of our making, they are chinese making, so a lot of people believe that the only way to deal with that is to hit the sell bunt here in the united states and so unfortunately, we are along for the ride. >> we should also mention that

mario draghi's news conference over in europe has begun and headlines are moving and perhaps those are having the most dramatic impact on the futures here. there he is, the president of the ecb, talking about more downside risks, steve, having emerged. >> going to wait on this a little bit, sorry, guys. but now he is saying data does indicate an economic recovery. what he is doing, it sounds like he is reaffirming, from what i can tell, just looking the these real quickly, reafirm the case for the quantitative easing here, saying september -- keep going to september 2016 or longer if necessary. he talks about the program being flexible, if the inflation outlook changes. i suppose that's both ways, but i guess in the context of recent developments, he mean it is it goes down. >> looked like, i thought i saw a head line, the expectation for inflation has changed a bit from a previous read. >> xorkt i was scrolling quick labor day that was the exact headline i'm looking for.

keep scrolling, you keep talking, if i come up with the inflation number, i will interrupt you. there it is right there to use all available instrument fuss inflation outlook changed materially or case un-unh wanted monetary tightening. >> nonetheless, it does appear to be having somewhat of an impact on the future markets. >> two camps, those that think the ecb will go shorter and those who think they are going to got same amount as promised. >> yep. well, interesting. scott nations, thank you so much. we will see how this trading day unfolds but looks at least at the start as though it's going to be a pretty decent one. when we return this morning, market volatility throwing some valuations for a loop. we will tell you what companies are trading at a discount right now. and then, the release of the force awakens is months away but disney is firing up its promo machine. tomorrow, a ton of toys and merchandise hit shelves for force friday. the details are just minutes away. "squawk box" hits a light speed right after this quick break.

this just in: 50 million customers' data was not compromised this morning in a security breach that didn't happen. wall street. not rattled. at all. no. not at all. not at all. i mean, look at the day. sir. sir. what went right? what went right? everything. thank you. with threat intelligence, behavioral analytics, and 6000 experts, ibm security will help keep you out of the news. my dad's company wasn't hacked today. cool.

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welcome back. the market's recent volatility thrown some stock val fwirgs a loop. our dom chu is here now and joins wuss that.

dom, good morning. >> good morning, becky. our investing team at cnbc pro took a look at the dow jones industrial average, the blue chip stocks in america and looked a what the their historical valuations have been on a price-to-earnings basis and figured out swrit biggest discrepancy from those historical averages. here's what they found. if you take a look at some of the business big discount us in terms of valuation in the dow, goldman sachs currently trades around a 10 to 11% discount from where it typically does trade on a price-to-earnings basis. it's currently somewhere thereabouts 11. we did some rounding. on the average, five-year p/es 12, we get that kind of a move here and all of a sudden, off slight discount again to the overall market. goldman sachs, 10% discount, am, 14% discount to where it typically raids on valuation basis, priced to earnings over the last 12 months. travelers, caterpillar and the single biggest discount in terms of historical valuations the last five year, united technologies trading at a 20%

discount, p/e-wise to where it typically does. there is the discount side. it begs the question, which one of the stocks are maybe overvaluations compared to where they typically do trade. so we took a look at those as well. this particular stock in the dow currently traced at around 28, 29 times earnings. historically over the last five years, trades around 14, which mean it is just about double what its normal price-to-earnings valuation is. that is none other than tech giant microsoft. right now twragtd biggest premium, valuation-wise, has over the last five years, so, that's part of the story. for more on the store groirks to cnbc.com/pro. subscribers there can get full details about the dow and could be value or adjustments made to those particular large cap valuations guys. >> let's get back to steve liesman who with futures jumping now has more on mario draghi. steve? >> these are definitively dovish comments here.

a couple things, saying inflation is going to rise more slowly than expected. the ecb staff lowering their inflation forecast through 2017, lowered their growth forecast through 2018. and he talks about 2016 september being the time when they will do quantitative easing and repeating that phrase for which draghi has become famous, we will do whatever it takes. and pointing out that the europeans' quantitative easing program is flexible, that as you know, euphemism, we can go up or down as needed. in this case, subjecting we might be able to do more here. the euro. it was 112, two-year note in the united states, that's also moved, the bund moved, they have all moved on this. here are definitively dovish comments from grabbidraghi. a bit in the mark that's thought the ecb might end early in 2016

a sign not being eliminated but coming out a bit. >> this con nen drum the central banks are in, they want to make start moving off their zero interest rate policy here or ending qe early there. it's the inflation question is the biggest question, one of the biggest questions. >> it is and the differentials and currencies is absolutely huge, right, because the euro's going to weaken here and draghi has wanted that for a long time. and he would love the idea of the u.s. moving and him being able to stand pat. >> all right, steve, thanks. when we come back, the force awakens hits theaters on december 18th but the big promotional push begins tomorrow a look at disney's digital strategy to sell toys and gears ahead of the big open. i'm going to channel yoda here.

why at 12:01 tomorrow, which disney is calling force friday, the media giant is launching a slew of toys that kick off its big promotional pitch for this december's "star wars" movie and taking an unusual digital strategy to sell those products. cnbc's julia boorstin joins us from lucas film offices in san francisco with more. hey, julia. >> hey, scott, that's right, "star wars'" big toy launch with this product like a light saber isn't technically until tomorrow but disney is giving youtube

fans and "star wars'" fans a sneak peek right now on youtube as it works to introduce "star wars" to a new digital generation. disney is giving the maker studio stars who have huge followings on youtube movie openings to check out live on the "star wars" youtube channel. disney and 4maker are tap nothing the boxing trend responsible for 178 of the top 100 youtube channels and 8 billion views in the first quarter. with events featuringmaker studios stars in 15 cities around the world from sydney to los angeles, disney is make the most of the acquisition of maker studios at a time when it is under scrutiny after losing two senior executive and face questions about its failure to meet certain growth goals f t. s if this works, disney will introduce "star wars" to younger

con tents and get them hooked on "star wars." i will have more on "squawk on the street." >> we will see you in a bit. when we come back, jim cramer from the from the new york stock exchange. find out what will move markets? you still have time to send us what you are buzzing about. our keep squawking segment is just ahead. behold, these are two wind turbines. can you spot the difference? the wind farm on the right was

created using digital models and real world location-based specs that taught it how to follow the wind. so while the ones on the left are waiting, the ones on the right are pulling power out of thin air. pretty impressive, huh? now, two things that are exactly the same have have never been more different. ge software. get connected. get insights. get optimized. dentist appointment when my teeth are ready? ♪ can it tell the doctor how long you have to wear this thing? ♪ can it tell the flight attendant to please not wake me this time? ♪ the answer is yes, it can. so, the question your customers are really asking is, can your business deliver?

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let's get to the new york stock exchange. jim, draghi sounding dovish. futures looking good. we still try to figure out if bottoms are in or close. >> you were in spain. congratulations on that great trip. i know you like european football. i think this is going to hurt the case that i was hoping, that the strong dollar would be less strong. they have to debase the you're euro to continue their sales. i'm worrying when china reopens, they are going to have to devalue. these are not good for individual stocks. the futures guys are totally in

charge. >> to this question of whether we feel like we are at a bottom or close to the bottom or need to fully retest, where are you on that? >> very much like 2011, down 17% on what was going to be a bond collapse. this is not as bad. i am watching brazil being as bad. collapsing, equal to the pain in 2017. we were down in 2011. i don't buy the shiller, it's dangerous. saying it is dangerous, he is a professor, nobel winner. i raise eyebrows about the idea of calling this market dangerous. >> the dow could drop by another 5,000 points i think it is what he said. it is not too early, jim, either to look to tomorrow. i think that's going to be critical in the thinking of the

fed. >> i think he is right and they are wrong. fisher has wanted to raise forever. i question their, how was their guessing. i am being such a diplomate, it is killing me. >> i can sense the pain. >> this jefferson wrap i have got going, it is no good for me. >> cramer, we love you raw. say it. >> no, no. i am a diplomate. it wears poorly. >> we'll get you fully unplugged in five minutes. see you soonment look forward to it. >> when we come back, we have more of the stories that have you squawking. i will be joining steve adubato tonight on pbs . so many stocks down and out. why does anyone feel good about this market at all. we have some recession-proof

stocks that are shining.

this just in: 50 million customers' data was not compromised this morning in a security breach that didn't happen. wall street. not rattled. at all. no. not at all. not at all. i mean, look at the day. sir. sir. what went right? what went right? everything. thank you. with threat intelligence, behavioral analytics, and 6000 experts, ibm security will help keep you out of the news. my dad's company wasn't hacked today.

cool. great time for a shiny floor wax, no? not if you just put the finishing touches on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. welcome back. time for keep squawking college football kicking off. matchups between michigan and utah and tcu and minnesota to name a few.

squawk viewers are weighing in on which teams they are excited to see take the field. james said he is rooting for ohio. another squawk fan likes west virginia. tweets, let's go mountaineers, the big 12 surprise. this is us. becky from new jersey tweets, the rutgers knights will face the spartans. >> now, i'll do an answer to the question that's been keeping all of you up at night. how many trees are on earth? >> about 3 trillion according to a new study coordinated by yale university. ruffle 422 trees for every person on earth, eight times more than previously estimated. the bad news, the defor es administration rate remains steady at 15 billion trees per year. we are reading a story about trees and i have one right here. >> wasting paper.

terrible. the lorax is going to get you. >> thank you, guys, both for being here. scott, thank you and welcome back from spain. it has been a pleasure. we hope you join us back here tomorrow. don't forget, we have the jobs report that is coming up. the dow futures are up almost 100 points. right now, it is time for "squawk on the street." we'll see you tomorrow. good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer at the new york stock exchange. david faber is off. pre-market getting a little squeeze courtesy of mario draghi who says downside risks have emerged, cutting gdp forecast. chai in being closed overnight doesn't hurt. a lot to look at today. 10-year at 2.154. oil