capital back? you saw the saudis take back capital last week. it's uncertain. there's a lot of counter currents in the market. you're seeing it. >> barry, thank you very much for being with us today. it's ban mreeen a pleasure. >> thank you for having me. >> thank you for joining us. right now time for "squawk on the street." >> good tuesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. can the market make it up six days in a row? the premarket had suggested a pullback. futures did turn positive about ten minuteses ago. dupont, pepsi, fedex and tesla are news. people talking about the zero yield at the three month auction. in our road map this morning,

due month's chairman and ceo is stepping down after six years in the post and five months after winning that proxy battle against an activist investor. >> freeport trimming its board and reviewing strategic alternatives for its oil and gas businesses. >> pepsico lasting its full year outlook. first up, futures indicated near the flat line a day after the s&p saw a five-session winning streak. all the s&p sectors finished monday in the green led by industrials, up almost 3%. jim, from friday's low, the dow is up 762 points. >> this is a market where a lot of people were caught leaning the wrong way before this rally, carl icahn, very noted investor, sounded an alarm. i think people were short betting that the number would be strong on friday, and we would

have this calamity that didn't develop. at the same time peoplecloses ye negative news out of china, and glencore was able go up large. took a breather, now the earnings start. it used to be alcoa. today it's pepsico. and if you start with pepsico and look at it, you say, wow, this is a good quarter. p pmc-sierra, positive stuff about dupont. can we continue the round? i don't know. i think we're overdone. >> is this the chance to sell stuff you wish you could have sold at 1870? >> i think there's industrials that have gone up a great deal that went up in part because people said nelson peltz bought ge, we're fine. we have not heard negative news about china lately. china comes back october 8th,

nelson peltz did not buy an etf for industrials. he didn't. >> what do you mean? >> ge is not a proxy for him taking a position in all the industrials that rallied. >> not at all. kind of the opposite. >> they made it clear, it's a mispriced security. we will see if that proves to be a correct statement over the next couple of years. i would expect them to own the stock for at least that long. i do wonder. september was just terrible. >> right. >> i got hedge funds, i haven't pursued some of them. closing down, huge redemptions. you have guys down double digits. i don't know how much flows matter or not. >> no, you're so right. the flows. >> the new fiscal year for some new mutual funds. >> mutual funds had to sell. >> i don't know to what extent that played into this ralliment. >> at the old trading desk you would say big dog, but the

mutual funds did, indeed, had so to do some taking of profits. the hedge funds were very much hurt. the last dip down was about redemption. what i feel -- i'm concerned about, if you look at dupont, we'll talk about it, you may want dupont as a break up. the line items of dupont were terrible. >> yeah. >> by the way, brazil? you have business in brazil, you're down 40% because of the currency. >> yeah. a lot of guys do business in brazil. >> even though we'll do dupont in a second, we have made up for september's losses, and then some. you were worried in september, this rebound has done nothing to assuage those concerns. >> i was worried about glencore, i still am. china has done nothing. the mortgage rate cut was big for me. it says our housing bubble is over. this wynn and las vegas sands is

a major reversal of the communist party that tried to crack down on this excessive party. they're making credit easier and going for excessive spending. that's prescription for not hating china as much. >> you saw german factory orders today, big miss. >> really bad. part of my theory why they can come back is that europe has got to be better. this is not what you want to see if you want the dollar to go down. if you look at pepsico, they're saying maybe we've seen the peak in currencies away from the dollar. when i look at the globe, you need to see china better. did i get that? >> no. but thanks for calling back now. >> is it the wife? >> no. thank you. >> the wife knows not to call. >> the kids have soccer. >> last hour and a half i'm trying to get this person. >> dupont announcing that ceo ellen coleman is stepping down october 16th after holding the

top jobs since '09. edward breen who oversaw the break up of tyco taking over as interim ceo. kullman's retirement comes five months after they won the proxy battle over nelson peltz's tria trian. >> man, i tell you, i remember nelson peltz saying there will be another big cut, right? >> he did. >> this was not a big cut this was a meekly -- >> through the proxy fight, he pointed out how many times they had not met previous guidance. here we are again, they're saying brazil, it's bad but is it just brazil? then huge cost cutting they're talking about moving into here. >> the conference call was unreal, frankly. >> why? >> hey, we had another good quarter. ellen's doing good job. things are good. >> okay. >> we missed big.

that's all right, it's brazil. guys, it was a bad call. don't put lipstick on that one. >> questions now, of course, we can debate -- certainly ms. kullman, seven-year ten youre, was cut short. they'll say fired, she'll say retired. you have an interim ceo. will ed breen be interim or permanent? they are undertaking a search in all seriousness, but ed breen ran tyco, motorola. >> he created so much value with tyco. >> this fits with his lifestyle. i thought that he was interested maybe in one more gig as a ceo. only 59. i will be interested to see whether he chooses to stay on and is given the ceo job permanently or whether he really is interim. i don't know the answer. but you could make the case he

would be permanent ceo. the question is, he know house to sell things, move assets around. he did that at tyco, created value there as well. >> let me ask you, something joe asked me earlier. she won the battle, lost the war. >> right. no doubt. >> how did that happen? because of a missed quarter? >> yeah. listen to ed garden yesterday from trian. he turned the question around, but the first part of the answer is interesting because it lends to the idea that they weren't done at dupont and the board must have known that. >> the dupont story is far from over. but let me make an observation, you know, it's all about revenue growth and margins. in the case of dupont, we were talking about a separation at dupont. not for the sum of the parts,

but because it made no sense to us that as part of an am amalgamation the places that make up dupont have worse operating metrics than small stand-alones. >> you have to wonder if that narrative will have more currency in the boardroom now. >> how about if they put nelson on the board. what would happen? >> nothing says they won't. >> if she had just said, listen, we need these guys. >> do you think it would have been a different outcome? >> i think she would have kept her job. >> you do? >> i think so. >> really? >> she could have said i'm not happy with my performance. i need help. here comes help. i segue to that because i think the freeport ceo will keep his job because they're open minded. >> you have been doing some work on activists, but the journal today looks at 71 instances

where an activist gets involved. of those 71, outperform their peers, not by a lot, but by five points. >> very interesting piece. it's almost like -- the term doesn't work. the term activist doesn't work. >> it's very broad in its nature, there are a lot of different strategies that we pointed out. i was talking about this the other day, given the size of positions and how bad september was for some activists, who own valeant, we talked about jeff ubb, enormous positions, long-term holder. many of these guys are long-term holders. carl icahn owns these stock force years. the trian guys own stocks for years. that's one set. there are another set of acti activi activists. it's not always ended up rosie. >> we have to come up with a better term.

>> breaking news from twitter, unveiling what's been known as project lightning. calling the much anticipated feature moments. this is dorsey's vision of a slimmed down version of the project as a way to attract first-time users to the platform. it's twitter's first attempt to curate the 500,000 tweets sent a day. the floods in south carolina will be a package of photos, tweets taken by residents. >> behind the scenes i have been pushing, pushing, give us this. could we make it so we can follow topic and make it known -- no not #catsthatpurratdogs. but give us something meaningful. they kept promising. they kept promising. they said it would be out early october. this is something they promised and delivered and a lot of us wanted. this will make it so this should

be your newspaper. this could work. >> the manager overseeing this particular product says what we're trying to do is get the content directly in front of you without you making decisions. >> that's smart. they got to make it easier. i was with my daughter this weekend. she hijacked my twitter feed. dad, we'll do something new. we'll thank people and put smiley faces for saying things nice. why would we do that? it's nice. when we come back, ginni m ginni rometty. and pepsi beating guidance. mores s i"squawk on the streetm post nine in a moment.

. pepsi had a nice earning beat. shares on the rise. sara eisen joins us early this morning with more on that. good morning. >> good morning. pepsi out with third quarter results beating on the top and bottom line and raising its full year outlook, raising margins. joining us now is hugh johnson, pepsico cfo and vice chairman. good to see you again, hugh. >> great to see you, sara.

good morning. >> so the strength came from north america, both on the beverage side and on frito lay. should we take it as a good sign for the u.s. consumer? >> yeah. i think we feel good about that now. i love the way you guys closed the last segment. beverages, snacks, profits. i couldn't say it better myself. i think there's two big thing going on. number one, the pepsico portfolio is working. you know, previously europe and asia, middle east, africa were growing more quickly as north america was slower. now that north america picked up, you see all of the businesses. north america beverages, frito lay and quaker are all performing well. maybe a good sign for the u.s. consumer. we saw revenue up in the convenience store channel up about 7%. that's terrific sign that at least the u.s. consumer who likes our product is doing well. i think that's story number one.

big story number two sara, is the combination of enhanced productivity which i think we've been seeing over the past couple of years. we've invested in automation, in market restructuring and shared services. we've been putting that money partly into the bottom line. operating margins up about 60 basis points. and partly into research and development and market and advertising. we're growing sales faster than pierce. that's enabling us to drive more productivity. >> i wanted to ask you about that, hugh. your boss spoke about the productivity savings on the call right now. why is productivity so important to pepsico right now? >> no. i think we've actually been at it now for several years. i wouldn't describe it as a 3 g effect. though we have respect for what they do. we invested in capable to drive

continuous productivity improvements. part of it is smart spending, managing zero based budgeting, but also running the operating system more efficiently. we invested in systems to give us more visibility and now investing in capability to drive costs out. part of that is going into the bottom line, part of that is going back to growth. that's a wonderful value creating formula for the investor who wants to stay in for the short-term and long-term. >> hugh, jim cramer. good to see you. >> hi, jim. >> we've got a series of stories that come out about carbonated soda drinks, diet or regular. how has your company been able do well in the liquids category despite that bad publicity? >> it's a great question. i think even there we have a formula that's working very well. first of all, we were somewhat ahead of the curve in terms of

investing in noncarbonated beverages. we have the leading sports drink with gatorade. we have the leading tea with lipton. we have the leading coffee with starbucks. we have the leading orange juice with tropicana. as consumers shift from carbonated soft drinks into noncarbs, we are the beneficiary. for the quarter, noncarbs were up 10%. that's why we saw such terrific north american beverage performance. >> i know you took over quaker. >> thank you. we are doing well in the cereal category. we posted a quarter of 2% revenue growth, 2% profit, if you take out the gain from a profit year, profits were up 17%. combination of share gains, pricing and productivity are

working in the quaker business. >> hugh, thank you very much for joining us. hugh johnston of pepsico. diet volumes were down 6% to 7% this quarter. they released their new diet pepsi without aspertame and consumers did not go towards it yet. coming up, we will count down to the opening bell. we did not talk about tesla, federal express, freeport, mcdonald's all day business. that and more when "squawk on the street" comes back.

they come into this iworld ugly and messy. ideas are frightening because they threaten what is known. they are the natural born enemy of the way things are. yes, ideas are scary, and messy and fragile.

but under the proper care, they become something beautiful. awe believe active management can protect capital long term. active management can tap global insights. active management can seek to outperform. that's the power of active management.

where are we? is that house music? that's horrible. >> we're clubbing. we will be clubbing the people shorting pm krspmc-sierra. they are being bought by skyworks. skyworks has the innards of every cell phone. david spent a couple billion dollars in cash to buy this. david, during the great heyday of 2000, p pmc-sierra going up. it makes the company more diversified. that stock has been not so hot of late but up here. >> it looks like they're getting way more than the 52-week high.

>> they're doing good thing to diversify. preannounced a better than expected quarter. >> let's look at skyworks, particularly in this market where we have seen stock prices not respond as positively as they had previously. that's a barometer for the health of the mma market. >> give than they preannounced, you would expect them to be up more. people are technicians and looking at this as k2, where it's very dangerous. that's where all the accidents happene happened. >> not a lot of oxygen up there. >> exactly. illumina, this is gene sequencing. people thought there can nothing that can go wrong with illumina. it's a red hot stock. if you look at ilmn, look at that.

how do you like that? >> this was a name -- wasn't roche after them for a while? >> yeah. everybody loved it. there's a lot of pressure on biotech. just illumina is the losing share and losing business. >> they have the box right, they can sequence you quickly. >> people in the business say this is a very -- this is the break through company you need to use. >> eventually we'll carry around other genom on the phone. >> absolutely. everything you need for your vitals is on your phone, but you want to find out whether your genes will yield some sort of genetic proclivity for a terrible disease, and you need illumina. do you buy it on this weakness? this took everybody by surprise. wait until is settles. when it's down that much, that means there's a second day. >> made me think of the apple

watch, you could have your gene on the watch. he's back to his breitling. we have not talked about freeport yet. more "squawk on the street" after this. here at the td ameritrade trader group, they work all the time.

sup jj? working hard? working 24/7 on mobile trader, rated #1 trading app in the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of the other competitors do in desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivative pricing model, honey? for all the confidence you need. td ameritrade. you got this.

you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in about a minute. a lot of various news cycles. some news from big industrials, large cap companies like pepsi, dupont and fedex. a lot of mma. a lot of food news, whether it's cheerios, general mill, yum tonight. wendy's, mcdonald's all day breakfast. >> mcdonald's i think has been going up because of breakfast all day. they created a lot of drama about it. easterbrook is turning that company around. mcdonald's remains a buy.

people have been saying sell it. no, the reason why pepsico did well is not soda. mcdonald's, breakfast is better than people think. it matters. it's good. >> if mcdonald's can get another 80 cents or so, you have go all the way back to last summer, july of '14 to see levels above 102. >> he's real. >> i think it will be a huge engineering challenge. already people upset that hash browns are not available everwhere. we'll find out more as it rolls out today. there's the opening bell. at the big board today, olin corporation. >> king of chlorine after the dow deal. king. >> at the nasdaq, baldwin and lyons, a property casualty insurer specializing in the transportation industry. speaking of transportation, fedex upgraded. they say there's been a enough

guide downs in a slow economy, they can make the things work. and surcharges again boosted for u.p.s. >> i'm looking at the price of heating oil, natural gas for the winter is the lowest in a long time. putting a lot of money in consumers products, but it goes to fedex because of raising oil -- no. no. come on. i'm pro these companies. i didn't get that. >> you think that's -- >> it's a way to make money. i'm just being hard on them. united parcel got together. they didn't hire a lot of people as i thought they would for the holiday season, but i think they got an algorithm for getting rid of the boxes that take up room in the truck. >> i want to get to freeport in the faber report.

i wanted to get to baker hughes. they did amend their 13d reporting. they intend to have conversations with members of management and the board to discuss way to enhance value. topics include board composition, which may include whether it makes sense for a value act employee to be on the board, operations, asset allocation, dividend policy, financial condition, mma strategy, a lot of other things. trying to buy halliburton. >> yeah. i don't know. i like slumm halliburton, i don't know if that's what you want when oil companies are strapped for cash. >> if they do that deal, the cost saves will be enormous. they will represent a true competitor to schlumberger. >> soup to nuts. schlumberger is an amazing.

it's a buy. oil prices have bottomed here. i know the goldman $30 call, i don't think it will happen. production cuts are too great, particularly in north dakota. product t production cuts are massive in north dakota. i cannot believe how the ratchet backed it up. >> the journal referencing smaller sites still proliferating out there. >> still, you know, people drilling the sweet spot. these companies, the credit will be shut down. contra raised money, that's smart because so much property will be for sale. freeport, i don't know if there's buyer fors freeport, i don't know if there's buyer for for that. >> valeant has contributed to the success of the firm over time, and purchasing square, a huge holder of valeant.

vrx down another 10% yesterday. just wanted to look at it this morning. it's flat. it's caught up very much centrally in this growing debate about rising drug prices. an interesting story in the "wall street journal" today about avinex and its maker biogen. it's a 20-year-old drug for the treatment of multiple sclerosis, they have raised the price dramatically over the last few years. it's a strategy for many of these companies as they watch values come down. valeant acquire companies and then jack up the price of the acquired drugs where there's not a lot of generic competition. it has come up in the mylan fight. wait until there's a jenngeneri competitor to the epi pen for mylan. look at how much they have raised that price over the last four years. dramatic. >> basically saying our numbers

are fine, i mentioned that on "mad money." they raised up -- actar had been right. >> had been around forever. this is the kind of thing they can say all -- they whine about owl business is good there, but they made some mistakes. >> do you think this ends up somewhere or are investors being emotional when they sell these names and the idea that there could be price controls? seems like you're going down a dangerous road. >> i had michael weiss on last night, a banker who runs tg therapeutics, he said there are real guys who are gouged, they'll be found out, they're bad eggs, the rest of the egg carton is okay. i think it will be forgotten about. saying that hillary clinton almost destroyed the biotech industry in '94. the dramatic decline in biotech. no one wants that to happen again. they save too many lives.

but it's ba battle for now. if valeant can have any rally that lasts a day -- sunedison was up for a few minutes. >> few minutes when? yesterday or today? >> this morning. it's cloud edison again. >> citi initiating cisco with a buy this morning. they see 15% upside, 30% target as margins increase as the revenue model shifts. they do initiate a sell on f5, that's the biggest loser on the s&p 500. >> i think chuck robins is doing a remarkable job. you'll see a lot -- radware had a bad number last night a software security, you know, all this stuff, cybersecurity. cisco is offering a soup to nuts cybersecurity situation that the services providers like. watch big service providers come

back. i think they'll spend again. >> you do. >> i do. they've been absent from spending for a long time. they'll come back. >> they spent. they just have kept the spend relative -- >> they spend. >> you mean growth. >> they'll put some orders in. how about that? >> okay. >> i'm looking at the list of week to day gainers. top five, transocean, marathon, alcoa, micron and number one is dupont. 15% for the week to date. >> wow. value -- value created there. >> i mean, you can still question whether trian was better off having sold when they got beat. >> right. >> right? >> stock was 70, wasn't it? >> higher than that. >> yeah. >> but 57 looks better than 45. >> well, yeah. >> yeah. >> actually 47. >> that's -- >> you like that. >> you did ann algorithm. >> can't get anything past me.

>> the oil, oil has bottomed. they are the worst of the oil and worst of the drillers, the ones that were most stretched. i know oil was down 25% in q3, i think that oil is finding a bottom, and that does matter. oil turned up on friday. that's when the stock market turned, not from the employment number. it was oil turning. >> right. >> yesterday, oil started go down. the market was turning down. oil turned, then the s&p 500 turned. it's in charge. >> how much of this move in depoi depoid dupont is much the expectation that breen will undertake -- maybe they do something with ag. dow chemical may want that unit. do you think that's part of why -- this is more than people might have anticipated. >> dow is flushed with cash. olin, they own 50%. they have a lot of cash. andrew livers said we're buying back stock. that's our plan. breen did create -- i've done

this study at tyco. breen, thatdestruction. there are health and safety businesses that's good. electronics business, materials electronic businesses not that good. and brazil, brazil. look at venezuela and pepsico? uh. latin america. remember latin america? >> vaguely. >> as jim and david say, the dow would easily be negative without dupouupont helping. let's get to mary thompson. >> mixed picture here on wall street. this on the heels of gains in asia overnight and a turnaround in europe as markets shrugged off disappointing factory data from germany. look at the s&p 500. yesterday it hit 1989. that's been an area of

resistance. 1989 to 1993 for the s&p over the last month and a half. we'll see whether or not it can break through the levels. those are some of the levels that traders are watching. today pulling back having gained for the last five trading sessions. couple of groups we're watching, semiconductors who have been performing very nicely on the heels of better than expected earnings last week from micron. today getting some support from the news that skyworks is buying pmc-sierra for $2 billion in cash. we're also watching energy. you heard jim mention it earlier, talking about oil bottoming. one interesting thing about the s&p energy sector it crossed above its 50-day moving average yesterday, which would expect short-term move to the upside. it was the first time in 92 trading sessions that it moved above those levels. energy getting a lift from crude oil today, which is higher thanks in part to weakness in

the dollar. transports we're watching. a big day yesterday. they opened lower, but now are trading higher thanks in part to federal express, following the lead of u.p.s. and adding a fuel surcharge. those are contributors to the dow transports gains early on. biotech, has been showing a little bit of strength the last couple sessions, we'll see whether it can weather this guidance by illumina. biotech index down about 2% now. quick check of -- that's not good. off 19% for illumina. after the company said that weaker european and japanese markets are going to result in the company cutting sales guidance for the rest of the year. a quick check of the materials group. these are the stocks we'll be watching. dupont, providing the support to the support to the dow, up 39 points now. the company cutting guidance and

upping cost cutting measures. freeport freeport-mcmore ran exploring energy alternatives. the dow up now 44 points. >> thank you, mary. let's get to the bond pits. rick santelli is at the cme group in chicago. good morning. >> good morning. even though you might look at rates and see we're only up a basis point or so, when you look at it in the context of a two-day market, really jumps out at you how much distance we've traveled in the last 24 hours on interest rates elope. alone. fed meeting, 917, there's so much talk about, you know, everything is doing well. the fed just doesn't want to upset the apple cart. the fed is in control of the apple cart.

this is not me talking. let's use 917, the second day of the fed meeting and look at some global markets, see how the patterns look. let's look at 9/17 bunds. keep that pattern in your brain. now ten-year, look similar? dax, also looks like stencil. the euro versus dollar. same thing. everything is core rating. a lot of it is correlating on that point in time where the fed surprised some by not receiving some accommodation. if you look at the spreads, flattening most associated with the fed, but there's a lot of moving parts all along yield curve. it's what's on the fed's balance sheet, what's going on in europe, the euro may buy us rates to the down side. you saw what our exports have done. you saw the trade deficit today. one-year steep on 30s minus 5s, we have not been at 156 since

last october. david faber, back to you. >> thank you very much. on to freeport, a maim we mentioned many times over the last few months as we watched that stock suffer dramatically in both -- as a result of the selloff in oil and copper. yeah. it's well placed this company. really well placed. this morning, you don't see this too often. they reduced the size of the board of directors from 16 to 9. now have seven independent directors led by their lead independent director, gerald j. ford. they have madonna on the board. that would be john madonna. >> oh. >> i got his attention. the question is what will carl icahn think? mr. icahn owns 8.8% of the shares in freeport, having increased his stake to 100 milli million. back at the end of august, he indicated he wanted to have

discussions, it's unclear if any have taken place. the way this has been described is trying to meet his objections and trying to keep him happy and/or at bay. we'll see whether that works or whether mr. icahn will still threaten to or will undertake a proxy fight to get more of what he wants. the changes are dramatic. 16 to 9 on the board of directors, seven independent board of directors, and they have undertake than strategic review of oil and gas businesses. they basically said we'll consider doing anything. we thought we would potentially spin off a minority interest, sell a minority interest. they'll look at anything at freeport. this is deep water gulf of mexico. >> yeah. they bought at the top. could they be selling at the bottom? deep water gulf of mexico is something that chevron excels in. chevron has the capital maybe to

do something. these guys are uniquely challenged in terms of their timing of things. and i could say that this was a disaster. they bought that oil company and it was a disaster. >> terribly done. >> and they would be okay without it. now they're scrambling. they have the balance sheet from haitis, and they will sell that oil company at the bottom. they will. they'll sell at the bottom. that's just who are. >> icahn bought an awful lot of stock. he's no dummy. >> the value, frankly, if you think china's comiing back, it' a great play. copper 40% of the world's copper goes to china. obviously people feel that oil can be bottomed because of china. if you think china is turning,

you have that natural call. otherwise, stay away. >> yeah. yeah. >> a disaster. >> we have some gold that comes out, too. they have gold. gold stocks have been doing better. nothing you want to write home about. freeport was a very good company. very good copper company. it became a very bad resources company. that balance sheet. you have to have a good balance sheet. that's the first thing they teach you at school. >> they do indeed. off its 52 week low of below $8. the high, about 33. carl? >> when we come back, ibm ceo ginni rometty on how monetizing watson fits into big blue's growth strategy. dupont is the biggest gainer on the s&p, by far the biggest gainer on the dow for the month. more on that when we come back.

when a moment spontaneously 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. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use. insurance coverage has expanded nationally and you may now be covered.

contact your health plan for the latest information.

go to ziprecruiter.com and post your job to over one hundred of the web's leading job boards with a single click. then simply select the best candidates from one easy to review list. and now you can use zip recruiter for free. go to ziprecruiter.com.

dad: yeah, 20 something years now. thinking about what you want to do with your money?

daughter: looking at options. what do you guys pay in fees? dad: i don't know exactly. daughter: if you're not happy do they have to pay you back? dad: it doesn't really work that way. daughter: you sure? vo: are you asking enough questions about the way your wealth is managed? wealth management at charles schwab. [extracurricular activitiessands help provide a sense of identity and a path to success. joining the soccer team...

getting help with math... going to prom. i want to learn to swim. it's hard to feel normal... ...when you can't do the normal things. [announceto help, sleep train is collecting donations for the extra activities that for most kids are a normal part of growing up. not everyone can be a foster parent... ...but anyone can help a foster child. from and the people whought you underwhelbrought youet speeds. temperamental satellite television. introducing... underwhelming internet speeds and temperamental television... in one. welcome to the moment no one's been waiting for. the fastest internet and the best tv experience is already here with x1. only from xfinity.

i tweeted it. >> there's a dunkn' there. that's not working. >> no. dunkin. >> like that one kmart out -- all the hedge fund guys go there. >> jim, we'll see you tonight. "mad money," 6:00 p.m. eastern time. when we come back, david kostin who last week lowered his full year s&p target. and a live interview with ibm's ginni rometty.

dow up 71 as oil steps on the gas. (vo) rush hour around here

starts at 6:30 a.m. - on the nose. but for me, it starts with the opening bell. and the rush i get, lasts way more than an hour.

(announcer) at scottrade, we share your passion for trading. that's why we've built powerful technology to alert you to your next opportunity. because at scottrade, our passion is to power yours.

good tuesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, simon hobbs, and david faber. s&p trying to make it six in a row to the upside. we have not done that since june of 2014. a lot of corporate news. oil helping out at 47.28. look at dupont as well. the company announcing that ellen kullman is stepping down october 16th after holding the top job since 2009. dupont, the best performing dow component this month. coming up later, ibm is working on a new unit betting big on artificial intelligence. ginni rometty will join us live for an interview. >> let's get to our road map for the next 60 minutes. stocks mixed after five days of rallies. david kostin will join us with his take on where the markets are heading nows for the rest of the year. price hikes help pepsi beat

the street for the third quarter. the company's cfo speaking out. and the l.a. dodgers becoming the first pro team to fund a tech incubator. the team's president will join us live to talk about that and, of course, the fantasy sports scandal. >> we have headlines here hitting the wire. the imf cutting its world economic outlook. we knew this was coming. we have the numbers. global economy is only expected to grow 3.1% according to imf. that's down from last year's growth. it's also down from the last imf forecast. the main reason the imf is lowering the outlook, china is lowing. the biggest cuts from imf go to brazil and russia in terms of economic growth. the imf on china leaving its

forecast interestingly unchanged. 6.8% growth. not worried about china. 6.3% growth in 2016. the imf says on the chinese markets and their impact on the economy, no sizable macro economic disruptions. playing down the china equity moves and the chinese slowdown. the imf does warn that inflation is going to be a problem in the advance the world. seeing it here in the u.s. it's likely to remain low in advanced economies. we will talk to the author of this report. he used to be on president obama's council of economic advisers. he will join us in the next hour. i think you sound good like that. >> a little fast. >> will you make it through? >> i'm trying. >> let's get more on today's market action. we are up 69 points on the dow. this is now a sixth day of gains for the markets, at least for the s&p, which means that in

that period of time of time we're up 5.5%, 5.6%. a strong rally. the vice president and client portfolio manager of jp morgan funds is here with us. you're an asset allocatorment. >> yes. >> when we have this strong rally from the lows, we know august was bad. does that change your view of where the markets are going? you are like, this is big? >> the u.s. was our preferred market. it's been that way for about a month now. i think the two things that the fed look at were high yield spreads and commodity prices that hurt sentiment. those two things have somewhat stabilized the past few days. voila, we have a rally in the equity market? >> is it about the fed? >> some of it is about the fed. we think december. >> that's earlier than other market participants say. why do you think it's december? >> clarity. i think september 17th, a lot of market participants, we're talking about the fed going. the fed wasn't talking about it. now we're getting to see some

fed officials coalescing around december. that's a big difference. the one that we thought was really important was john williams from san francisco. before the payroll number that came out at 142,000 that folks thought were bad, he said 100,000 in payrolls is enough to produce, shrink labor slack and be enough for them to move rates this year. that's important. >> but isn't -- and they've repeated that mantra. many in the market don't think they'll move. they also think that the fed is captive to the markets. in other words, if i think you won't move, you won't move. if they do then move, that's going to upset a lot of people. >> a game of chicken going on. the market is winning it. the fed keeps pushing and pushing. however they have two jobs. labor, full employment and price stability. full employment they've met. averaging 200,000 jobs. the inflation one, two things that held inflation down. commodity prices over the last

year, dollar, the ferocious rally in the dollar. they believe the pace in those two things are slowing. >> so you have reduced your exposure to equities in this environment. >> yeah. >> you added selective high yield sectors. >> that's right. >> that will be counter untietive to people watching now. >> there's a cloud of uncertainty around the fed. if you think about august and september when there was pain in the equity market, the barclays aggregate index gave you 50 basis points of performance in two months. so we reduced there because you're not getting the same benefit of diversification and fixed income. the high yield call, just get the client to pay rent. get some carry in yield in the environment while the volatility clouds are over the market. >> i'm looking at the imf global forecasts. cutting again global growth to 3.1% saying the risks are tilted to the down side. do you think this is priced in globally in stocks, bonds,

currency currencies, commodities? >> the chinese stock market went down 19%. they cited that. high yield spreads have widened. certainly you mentioned it in the open. it's not new news, folks thought global growth was going to slow. the number on china being more upbeat should be a silver lining coming out of that report. >> i thought it was interesting that they left their china forecast unchanged and upgraded the u.s. i know you're decreasing your risk to u.s. stocks, wouldn't the u.s. attract safe haven flows? >> again, the u.s. is like our blanket. we're going there. but we're reducing it because you're not getting the same diversification from fixed income. the barclays ag is not giving you that diversification. the u.s. is going to lead the growth engine. auto sales, third quarter auto sales were off the charts. >> before we let you go, somebody said overnight that they felt ameremerging markets

once in a generation guarantee. >> we have some for income accounts, but emerging markets will be a good trade. but tactically speaking over the next six months we don't want to have exposure just yet. we would rather be in the u.s., europe and japan where there's stimulus. good to see you. thank you for your time. microsoft kicking off its event here in new york city. just a few moments ago the company planning to unveil a couple new devices. josh lipton is there live with what to expect. hi, josh. >> carl, the event actually just snow getting underway. microsoft officially launched windows 10 in july. so now the tech giant wants to really drive adoption of this operating system by showing all its advantages on a range of new devices. so this morning the expectation is that microsoft will unveil new lumia smart phones.

they could support new features like windows hello or facial recognition. this is a tough category for microsoft. stakes are high. the windows phone only runs about 3% of the world's smart phones. also expected, a new surface pro 4. lighter, thinner, larger display. competition in this category certainly becoming a lot more intense with apple just introducing the ipad pro as well as forming partnerships with ibm and cisco, moving harder into the workplace, which is microsoft's bread and butter. timely, microsoft wants to capitalize on that wearables trend. be on the lookout for the microsoft band two. could boast a curved display, greater fitness tracking capabilities. right after the event, i'll have an interview with microsoft's vp of windows and devices. we'll wrap up all the news we hear this morning. stay tuned for that.

>> an option to log into a phone using facial recognition, josh? >> i'm sorry, simon? >> an option we think to be unveiled to log into your phone using face recognition? >> that's right. that's one of the rumors. the idea is that we should expect to see two new lumia smartphones. one of those features could be just that, biometrics. the idea you can log in using your face. >> many people think the company will mention that. josh lipton, thanks. up next, pepsi beating the street with its quarterly results. the stock is in the green. hear what the company's cfo had to say about the quarter and the health of not just the u.s. consumer but soda consumption. "squawk on the street" will be right back.

if you want get to mcdonald's before 10:30 a.m. but you still have to have that egg mcmuffin, fear not. today mcdonald's starts serving all-day breakfast. not all of your favorites are on the menu. ron mott is live in boston are more. >> reporter: we're just north of boston in the town of gloucester. in the good old days, ie yesterday, if you showed up at this mcdonald's or any other

one, one minute past the time they cut off breakfast service, you usually got that dreaded, sorry, we're on to lunch. that's all changed starting today. you can come here any time of the day, 3:00 in the afternoon, 9:00 at night, you can get a plate of hot cakes if that's what you're craving this is done because of social media. the company were pressured by fans and customers on social media saying would you please extend your breakfast beyond 10:30, which is most of the time when mcdonald's across the country cut off breakfast. this mcdonald's had been serving traditionally until 11:00. mcdonald's not just doing this because it wants to be nice, they have to change their fortunes literally because they had a ceo change here earlier this year. guest counts, the number of people coming to mcdonald's is down 4%. most important, revenues off 5%. they want to put some energy back into this chain. they think this is the way do it. because people love their

breakfast. it's the strongest part of their menu offerings. we will talk to some folks here after 11:00 to see if they're excited to get those mcmuffin and that egg sandwich this so crave. there was a big conversation with the franchisees about the additional cost of doing this as an innovation and whether the kitchens can cope. i hear there may be a problem with the hash browns because they occupy the fryer where the fries are made later in the day. so, there may be a cut off for some people around the country with the hash browns about now. >> well, you know, one thing -- one of the things that people thought it was an excuse for why mcdonald's didn't extend breakfast past 11:00, they claimed the grill was not large enough to grill hamburgers and sausages for breakfast. the hash brown items are popular. we'll have to see how that will work with the fryers and all the

frefr french fries they need to fry. it doesn't look like mcdonald's restaurants have changed their kitchen outline much in the way of adding more grills to the lineup or extending the size of grills, bringing on new fryers. we'll have to see how this all works. they know people like breakfast. they know some people really want an egg sandwich in the afternoon. >> a new fryer is a big capital expense, though mcdonald's said 90% of restaurant als will have hash browns all day. ron mott, thank you. pepsi out with results this morning beating on the top and bottom line. also pepsi raising full--year outlook. profits were hit a bit by the stronger dollar and international weakness in venezuela but strong performance on margins and sales growth. we talk to the cfo, hugh

johnston earlier on "squawk on the street." he talked about this global shift in terms of where the company is seeing growth now. have a listen. >> the pepsico portfolio is working. you know, previously europe and asia, middle east, africa were growing more quickly as north america was slower. now that north america picked up, you see all of the businesses. north america beverages, frito lay and quaker are all performing well. maybe a good sign for the u.s. consumer. we saw revenue up in the convenience store channel up about 7%. to me, that's terrific sign that at least the u.s. consumer who likes our product is doing well. >> analysts says that bodes well for coca-cola and tobacco companies as well. i thought it was interesting that volumes in beverages were up 3%. jim cramer asked about that where the strength was. it was in noncarbonated beverages, gatorades, bottled water. pepsi has been shifting out of

the colas. it add its new dietwith jo without aspertame. >> it's a tough macro environment for these companies. coming up, we're keeping our eyes on dupont. that stock up over 11% now in the wake of the news that its chairman and cfo will retire. plus ibm chairman and ceo, ginni rometty joins us for an exclusive interview. find out what big blue is trying to do now. (patrick 1) what's it like to be the boss of you?

(patrick 2) pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done? (patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you... (patrick 1)than me. i mean, you...us. (vo) go national. go like a pro.

with the dow cutting its losses to 18 as the gain on the

session. let's send it over to rick santelli for the exchange. >> today we learned that the trade deficit grew to 48 billion and change. exports, three-year low at 185 billion. it's the perfect day for the 35th commerce secretary of the united states of america, former commerce secretary carlos gutierrez, 2005 to 2009. thank you for taking the time. >> always a pleasure. >> you heard what -- we came into the piece with with regard to the trade balance information. tpp, transpacific partnership. 12 countries, 11 pacific rim countries plus the u.s., is it a good deal? what are the details you're aware of? maybe you can give us a glimpse of your thoughts on the topic? >> sure. i think it is a good deal, rick. 40% of the world's gdp, but more importantly we are woefully

underrepresented in asia. so -- this is at a time when china is leading the creation of a trade block of an asia pacific trade area. so, you know, we run the risk of getting shut out. it's -- trade agreements won't happen tomorrow. but five, seven years from now they are already building roads, going down from china through vietnam, laos. this is happening. this is a strategic necessity. i would hope it goes through our congress and is ratified in the other countries. >> you know, mr. secretary, as a free market guy, i think trade, fair trade, it's just -- there's no way around it. it's a great thing. it is always the devils in the details. are there any details to this that give you an idea that we're getting a good deal? is this a job creator? job destructor?

>> one of the biggest things i like about this deal is that it opens up access for e-commerce. and, you know, the u.s. leads the world in e-commerce. that's a very important aspect of this deal. but, you know, no one is totally satisfied. so, you know, the dairy farmers in new zealand would have wanted more. the biotech pharmaceuticals would have wanted more time for protection. some companies are against it because we didn't have any currency rules. you know, it's never a perfect deal for everyone. but i think it's a good deal for our economy. it's a good deal for the world economy at a time when we just don't see -- at least i don't see a big catalyst for growth. this can be that catalyst, especially since other countries will be motivated to move ahead with their own trade deals, maybe this will spur the europeans to move forward on the

trade agreement with the u.s. so, this is -- this creates the kind of momentum that doha never was able to. >> i will switch gears for the last 30 seconds. one of the issues of late are countries trying to keep currency weak to build export markets. we've seen a touch of that in today's report. how much of the foreign exchange will take away from any deal, whether it's a good deal or an average deal? your final thoughts. >> i think we're looking at a year where the dollar is going to continue to strengthen. and that is just, you know, part of the reality, especially with the -- you know, interest rates going to be raised at some point in the future. everyone knows that. that's going to put additional pressure on foreign currencies. so, you know, it's the year of the dollar. it's probably 12 months of the dollar. but that's not going to be permanent. this is a deal that's going to take years to implement.

so, you know, long-term, beyond currencies, this is the right move. >> mr. secretary, thank you so much for your thoughts. carl, back to you. >> we'll see you later on. when we come back, the s&p jumping 5% in the week since goldman sachs cut its year end forecast for stocks. david kostin will join us at post nine to talk about that. with the dow now up only 14. [ male announcer ] eligible for medicare?

that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, they could save you in out-of-pocket medical costs. call today to request a free decision guide. with these types of plans, you'll be able to visit any doctor or hospital that accepts medicare patients... plus, there are no networks, and virtually no referrals needed. join the millions who have already enrolled in the only medicare supplement insurance plans endorsed by aarp... and provided by unitedhealthcare insurance company, which has over 30 years of experience behind it. with all the good years ahead, look for the experience and commitment to go the distance with you. call now to request your free decision guide.

good morning, i'm sue herera. here is your cnbc news update. u.s. prosecutors say john ashe took more than $500,000 in bribes from a chinese real estate mogul and other business people. allegedly to help them gain investments in government contracts from the years 2011 to 2014. ashe has been arrested. two scientis scientists hav nobel prize in science proving that neutrons can change identities. isis militants firing missiles at a hotel, large plumes of black smoke rising from the hotel. residents reporting that the missiles were fired at the gate

of the hotel. 15 people were killed. a video of a dog being rescued by animal aid unlimited in india has gone viral on social media. the dog was found by aide workers in the street, obviously in tragic condition and nursed back to health over the past two months. that is our cnbc news update. back to you, simon. >> thank you very much. markets are flat on the heels of that strong global rally and ahead of third quarter earnings. joining us now here at post nine is goldman sachs chief u.s. equity strategist david kostin. you gained headlines a week ago saying you were lowering your forecast. where are you? >> my forecast is the s&p 500 will end the year around 2,000, and will rise next year to about 2100. the argument behind reducing our target for this year was really the fact that the chinese economic activity is coming

slower than we had originally anticipated. and energy prices, as you know, the energy earnings from energy companies have declined pretty significantly. so, the argument behind a reduction in earnings, basically is what drives the reasons for a lower price target. if you want to keep that in a simple mind, looking at $109 of profits this year, down 3%. lower earnings generally relates to a somewhat lower market. the idea of the lower market is lower relative to our target. our target had been 2100. lowered that slightly. >> you also said the multiples at risk. >> think about this. the fed, baseline forecast, the fed will increase interest rates in december. and that is generally associated with a compressing multiple environment. so as we look into next year, expectation is you'll have a slowly declining multiple, where the economy grows slowly with rising earnings. that offsets a relatively

flat -- flattish kind of a market. >> what if they don't? the bet now, is that those chances get pushed into 2016 and this giant rally that we have seen over the last few days has been on this idea that they're going to be on hold. >> so, if the fed doesn't raise rates, that would suggest that the economy is weak. that suggests you don't get a lot of sales growth. it also suggests there's not a lot of inflation, and not a lot of ability to increase margins. with a lack of top line growth and flat margins t suggests a lore multiple than you would in the contrary conditions. i think the idea of this environment is more conducive to a slowly declining multiple than increasing multiple. overtime a pe expansion phase, the market is associated with falling interest rates and falling inflation. we think the opposition is likely to take place looking out to next year. >> i would hate to have do what do you for a living.

we're 19 pointses away from your year-end target. as soon as you change it, the market shifts, and it looks like -- what do we do for the next three months? trade sideways? >> i believe you'll genuinely trade in a size ways fashion. what should we be thinking about from a stock selection point of view? first, the split and those companies selling domestically have continued to perform well from a price action perspective and from a fundamental perspective. those companies exporting, exporting their end market sales have had big, negative earnings revisions and share prices have gone lower. i believe that's a trajectory that will continue. that trend will persist. domestic revenue facing company also outperform. >> i understand the call is a top-down call on earnings. what about the argument that actually we may have over -- we have been overly pessimistic as a market about where growth is going, not just in china but in this country and there appears to be value in certain parts of

the market. >> there's value in some area, but the overall market is higher. that argues for better quality. >> where do you see the value? >> where we see value, those companies returning cash to shareholders would be an area -- a debate about whether should companies be investing more in company spending or returning cash to shareholders. the idea of a rate environment that's uncertain, that would suggest higher quality stocks and stocks that are returning cash to shareholders. dividends and buy backs, those are undervalued and under appreciated by many portfolio managers. if domestics are going to outperform, why is the russell so far away from the others? >> stronger balance sheets, larger caps -- >> you want big domestic. >> big domestic, stable earnings.

basically more quality metrics would be consistent with a market -- outperforming the market in this environment. apple as an example. macy's. examples of companies that meet some criteria domestically facing quality, more quality metrics that would, in my view, tend to outperform in this environment. >> pepsi this morning has 40% of sales from abroad. it's getting an 11% headwind from currencies, and yet still managed 7% organic growth. >> my belief is that the consensus expectations for earnings are too high. i believe expectations of margin enhancement and expansion is overly aggressive. we've seen four years where companies have not been able to raise margins. they've been flat, at just under t 9%, that would suggest that companies are finding it difficult to raise margins, maintain them, to be fair, but

have not increased them. going forward, expectation that people have, they will go higher is unreasonable. >> fwhere margins have plateaue, we've seen layoffs, corporate restructurings. would you expect layoffs to be a big thing in the next quarter? >> companies are looking to maintain margins. one area is investing in technology to try to enhance productivity. if that's not the case, other shedding divisions -- not shedding divisions, but spinoffs and restructurings is probably another arrow to be used or arrow in the quiver to be used. more outsourcing. i think there are strategies that managements are trying to employ. you see that in the conference calls. over the next couple of weeks we'll get the third quarter earnings results and then management conference calls. i expect them to talk about the guidance. the guidance will probably be

lower, not higher that puts it as a risk. >> one last question. when you tell people to drive towards companies that are returning cash to shareholders, in other words, they have excess capital, is there also a fear that we may have a credit problem coming into next year? >> would suggest that stronger balance sheet stocks ought to do better that's my belief. >> because there may be a general problem with credit and high yield onwards? >> in a rising interest rate environment that would suggest stronger balance sheets over weaker balance sheets. that's part and parcel of the quality metric story. good to see you. >> nice to see you. >> david kostin joining us from goldman sacks. up next, a live exclusive interview with the chairman and co of ibm, ginni rometty. "squawk on the street" will be right back. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns

like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. it's here! the most advanced iphone yet. get the new iphone 6s at t-mobile.

the network that's double it's lte coverage in the past year. our new extented range lte™ signal now reaches twice as far as before. and it's 4x better in buildings. want more? get the lowest price on iphone 6s with trade-in. zero upfront and just 5 bucks a month with jump! on demand™ get it now at t-mobile.

dad: he's our broker. he helps looks after all our money. kid: do you pay him? dad: of course. kid: how much? dad: i don't know exactly. kid: what if you're not happy? does he have to pay you back? dad: nope. kid: why not? dad: it doesn't work that way. kid: why not? vo: are you asking enough questions about the way your wealth is managed? wealth management at charles schwab

. markets now pausing after that strong five-day rally. this is where we stand on the sect sect sectors. materials spiking higher. >> materials up 1% here standing out as one of the top performing sectors in the s&p 500. in this current six-day streak, the material sector regained pretty much all of its losses since august. dupont, yes, it is having the most impact. gaining about 11% on that news that the company's ceo, ellen kullman will step down. freeport, lyondellbasell and

newmont mining also moving up. back over to you. >> thank you very much. ibm doubling down on big data today. it's announcing a new practice that aims to capitalize on the watson offering. the 2,000 consulting group will be called cognitive consulting solutions and advise companies how to use watson to their advantage? will it be enough for ibm? here to break it down for us, ginni rometty, the ceo of ibm. she joins us from orlando, florida. very nice to have you. what do i get if i hire your cognitive business solutions unit to come in and advise my company? >> david, let me back up a second from there. in the end, what you get is differentiation. but just to back up and to many conversations you and i have had, this builds on a foundation

that we have been building for quite some time. and as we talked about the strategic comparatives that form the base for any company becoming a digital business. you know we built big franchises around analytics, cloud, around mobility. in such that they are 25 billion and 27% of ibm at the end of last year, grew 20%, 30% again in the first half. that's the foundation. that is about becoming a digital business. but, when everyone is digital, what's differentiating? to your question what do you get when you think of cognitive? think about digital business, married with digital intelligence, you get cognitive. what i was here to talk about, in addition to a practice, this is an era. cognitive era. it's an era of technology and an era of business for companies. >> and you have ads to that point, of course that are starting, even on our own network. a wash in data is a world that needs to be reinvented or is

being reinvented in code with cognitive computing. you are using watson in ways that you had not a year or two ago. it seems to become a much more important part of your strategy particularly for these imperatives that you describe. is that the case? >> that's absolutely correct. in fact, if you think about cognitive as an era of technology, watson understands information. when you talked about a wash in information, it's not just the amount. think of a statistic that 80% of the data in the world is actually dark to computers. meaning it may hold it, but it doesn't know what's in it or understand it. so, these new cognitive systems, watson, it both understands it, it can reason, it can learn, and then in the end you can actually take those characteristics, thinking, learning, and then embed it in a business. that's what cognitive and what watson really starring in that picture does.

and you'll remember when watson played jeopardy. that was 2011. and at that time, just to show you how far we've come, watson did one thing -- question and answer. underpinned by five technologies. today that's 28 different things, going to 50. and, in fact, it's a platform. so think of these in this world many people think about how you create function as you compose it. the technology word would be api. watson is all these functions that you pull cognitive into every part of how a company operates. so this now takes and allows everyone to differentiate not only with information outside, but all the assets inside and turns you into a thinking business throughout everything that you do. a silver thread, both in my company and for our clients. >> right. the last time you and i sat down was a number of month backs. you spoke about these strategic imperatives, and you put a

target out there saying we will have 15 billion in incremental revenue from these businesses. six months on, are you on tract do that. >> $40 billion, in the first half grew 30%. we will continue on those franchises. the most important message to get across to clients -- today, when you talk about an era, an era doesn't happen in a minute. it's a long period of time, not only is it a technology era but changing the way a business operates. so, if i can circle back -- when you say -- i'm confident about the impact, not only on ibm, the impact on our clients. that's the most important thing about differentiation. what i believe cognitive will do for business is at the heart of it changes how you engage with clients, it allows you to scale expertise, you will build thinking into all your products and services. you will build a cognitive supply change in operations. in the end, you will completely

change how do you discovery. the kinds of results we're seeing, i think, are quite astounding. whether it's the idea that a supply chain drives anywhere from -- i've seen with clients 2% to 10% more sales, five points more margin or on the other side, when there's cognition in learning and how you engage and fill out an insurance form, nine points higher sales. to me that forms a foundation that is all about what we do for our future success and what makes our clients successful in the future. >> we are talking about the future, but in terms of the present right now, some of the head winds you're facing, whether it's currencies, given your international exposure or emerging markets which are an important part of your business, are you seeing continued weakness there, whether it be china or brazil or some of the other major markets? and will that have an impact on yourer in t your near-term earnings. >> around the world there are

different head winds we deal with t requires a different strategy for all different parts of the world. we talked about currency in a number of these things before. these are all things that are part of the global dynamics that we're managing now, david. so, that is all part about being a global business, it's all part about being, you know, having a view on the long-term as well, a view of what it is we do to reinvent this company. that's what today has been all about, to stay at a steady course, those strategic imperatives form a straight solid foundation that we'll continue to invest in. as we talked about, continuing to shift 40 -- 4 billion of spending into those strategic imperatives this year. and as i said, first half, cloud, 70%. as saw data analytics, big number. up 22%. mobility, as you saw, four times. so, this is what's forming the foundation for the ibm company as it transforms.

the next era is all around cognition. >> right. getting people to focus on it. i noted you had time to spend there with the premiere from china when he visited. there's a lot of tension, whether it's cyberespionage or protectionism. did you have an opportunity to talk to him? if so, what did you talk to him about? you also have a lot of employees in china, not just selling a lot of stuff there. >> we have a business in china, employees as well. i thought the visit was quite productive. not the first time that we have had meetings. quite productive. i think it was a good dialogue between the companies from both parts of the world talking about what everyone needs to be successful. >> we'll leave it there. i know you're running tight on time. ginni rometty as always, appreciate you checking in with us. chair, ceo of ibm joining us. when we come back, the l.a. dodgers winning their third straight nl west title, heading east to take on the new york

mets. they became the first pro team to fund a tech incubator. dodgers president stan cashin will join us to talk about that and the ongoing scandal in fantasy sports. st surprise!!!!! we heard you got a job as a developer! its official, i work for ge!! what? wow... yeah! okay... guys, i'll be writing a new language for machines

so planes, trains, even hospitals can work better. oh! sorry, i was trying to put it away... got it on the cake. so you're going to work on a train? not on a train...on "trains"! you're not gonna develop stuff anymore? no i am... do you know what ge is?

the l.a. dodgers winning big making the playoffs, becoming the first pro team to fund a tech ink baiter as well. our jane wells is live with president of the dodgers. hey, jane. >> hey, carl. stan, thanks for joining us. stan caster, president of the dodgers. we're here in plya vista. we'll talk about baseball fantasy sports and tech. congratulations third year in a row. >> thank you. thank you. >> last two years the team has collapsed in the postseason. why is that not going to happen this year? >> well, we have a very different team. we have a mature team and a good blend of both veterans and youth. terrific starting rotation to go along with a very effective bullpen recently, and i think we have the elements that can go a long way. >> how much pressure is on

everybody, especially kershawn. >> there's pressure every year to win it all. the fact that we're in the tournament in the postseason is a thing that we're very proud of, but no one feels we've accomplished our goals if this is as far as we go. >> the latest vegas odds give the mets a slight edge, which, of course, i'm going to bet the other side on that, but how do you get past the mets? >> first of all, we don't bet. we have nothing to do with betting. >> i understand that. >> yeah. >> they have a terrific young team and a young rotation that's very good. we're going to have to spend a lot of time this week scouting them and preparing the game plan, which i'm not going to divulge here. as i said, they're a good young team. what we think we'll be able to prevail. >> speaking of betting, one of the start-ups here you are funding has a fantasy sports related app. there's huge controversy now about draft kings and fan dual. i was interviewing the ceo last year, and he said of course it's bet, and he thinks it should be regulated like gambling.

what do you think about fantasy sports? >> i have nothing to do with any of that. they're in the advertising world, and that matters. i'm learning like you're learning what's going on in this end. the daily fantasies that we're seeing with draft kings and fan dual is a new thing. really emerging the last year or so. i think we're all learning about the stories last night and today. we're all trying to figure out what that's about. with any new eamericaning businesses or industries, there will be bumps in the road, and i can't tell you whether they should be more or less regulated. >> is it gambling? >> you know, the legislators so far have said it isn't, and i'll go with that for now. >> meantime, you've got ten start-ups here. $120,000 investment by the dodgers in, i don't know -- they're all sort of sports-related, but not necessarily folding back into the dodgers. why are you doing this? >> we thought we had an opportunity here to get beyond somewheres the business that we have of playing baseball on the

field. >> we've touched businesses that are in the sports field and performance and also in some of the analytic stuff and some of the consumer stuff to help them grow. really have ten diverse companies here that we are helping. some are brand new start-ups. some are a little more advanced going into their second round of financing. the additional advantage we had if we helped these teams was that we're a proven ready-made laboratory. we have 47,000 people at dodger stadium that we can help shape the eventual -- we thought it was a good fit. we thought our brand would attract dozens of applications from new start-up companies. by the time we were done, we had 570 applications. the interest was robust, and it's been a great experience. >> give me one in particular

that interests you? >> i can't do that because that would be like picking out one of my children. all ten have interesting futures and big-time -- >> you get a 6% equity -- >> well, that changes depending on the amount of the investment, depending on whether it's a brand new start-up or depending whether they're a more mad mathure company, but that's roughly the average of that. the mo important thing is these are all companies with great futures, and any piece of them is go that will be good for the dodgers, good for our customers, and good for, you know, people in general. >> stan, thanks. we'll have more of it, guys, on-line later, and i'm also going to continue the conversation to skip out why for the first two -- we finished no the second regular season. l.a. cannot watch the games on tv, but we can now in the postseason. >> if you say so. >> and i will be at the game saturday, and they are going to beat the mets. go dodgers. >> not. no, they're not. >> go, dodgers. go, dodgers. go, dodgers. >> let's go mets. let's go mets. >> go dodgers.

go dodgers. >> let's have a look at what's coming up on squawk alley. >> we have a big show coming up for you. for months what was project lightning is now twitter did hes -- >> will it move the needle for the stock? microsoft pulling back the curtain on some brand new devices for windows 10. what will they look like? we will take you there live? and the debate rages on over how exactly to police fantasy sports given this ongoing scandal between draft kings and fan dual. we will ask noted sports agent drew rosenhaus. all that next on "squawk alley." (patrick 1) what's it like to be the boss of you?

(patrick 2) pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done? (patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you... (patrick 1)than me. i mean, you...us. (vo) go national. go like a pro.

zarchlgts good morning. it's 8:00 a.m. at twitter head waters. it's 11:00 a.m. on wall street, and squawk alley is live. >> this car is automatic. it's systematic. it's hydromatic. ♪ why, it's grease lightning ♪ ♪