were getting along, weren't you? >> i thought so. >> he didn't go off in a huff. >> all of a sudden, there was commercial break. >> are you here tomorrow? >> i'm only here when you're here. that's why i like it. >> keep it that way. >> i'm on my show, "squawk alley," 11:00. >> we have to go. >> safe travels. "squawk on the street" is next. ♪ >> good morning, welcome to "squawk on the street," i'm david faber along with jim cramer. we're live from the new york stock exchange. carl quintanilla is on assi assignment. you can see we're set up, i guess we'll call it a lower open. as far as the ten-year note yield, where is it? ten-year, there we are, around the 2% mark.

crude that was the story yesterday. look at that. you were just at 50. we were just pushing 50. you saw the latest case-shiller home prices, they were just released at the bottom of the screen. san francisco, denver, portland have the biggest home price gains. let's get to our road map this morning. earnings, earnings, earnings. alibaba higher in premarket after profits and revenue beat expectations. yahoo! goes up when alibaba goes up. mixed results in from dupont, ford and u.p.s. the cfos of u.p.s. will be up later in the show to give us more insight. pfizer, merck, bristol-myers all beating consensus and boosting full-year guidance. take a closer look at pfizer. those were particularly good numbers. let's start off with alibaba, up sharply in premarket.

posting better than third quarter results. revenue up 32%. strong growth across the board, particularly in mobile. yahoo! owns stake in alibaba, it will be putting that in a separate company, hence it goes up, almost as much as alibaba because its core business is worth virtually nothing. it will be interesting, when the stake is sold or put into the new company and you see what yahoo! is worth. >> i know. >> including even yahoo! japan. >> it may be worth more to someone else than them if they fail to monetize what they got. whether it's tumblr, what they did this sunday, which people are mixed about. the nfl. >> right. >> what they may have in terms of search. they're not a totally lame company. it's just that when you back it out -- >> not much going on. >> not much going on.

>> the last quarter from yahoo! did not do a great deal to engender confidence. >> not a lot to write home about with yahoo! so much to write home about with alibaba. >> tell me. >> the merchandise value on mobile, 62%, the adoption -- >> mobile accounted for 62% of their gross merchandise value. that's been moving up every quarter. >> it accelerated. 28% year over year just for revenue. i think it's hard to read through anything other than the chinese consumer is back. i really think so. this is an amazingly strong number. david, they cut -- they're a good referendum on how the chinese consumer is doing. >> they are certainly as good a referendum as we will get. they also increased their presence in 4,000 additional rural villages where they provide purchasing and delivery

service. y >> yes, they are. >> covering that massive country. >> imagine how many drones they would need? a fleet of drones. like star wars. >> yes, it conceivably would. monthly average users, 386 million, jim. >> unbelievable. >> the take rate goes down as you switch from desktop to mobile, fewer people, as we know, think of advertising and all that the form function is harder. but it's stabilizing. >> yes. >> how about cloud? cloud revenue 128% growth. i know it's not a big number, but we know when you look at these companies, we just think about amazon cloud revenue, it's darn good. >> it is. it is. >> what a great quarter. >> they also bought back a lot of stock. $2.74 billion. they just put that repurchase in place, 4 billion over two years. in the september quarter they both bought 60% of that. jack ma, i have to say, it's

rare that you see a guy issue a mea culpa letter and you had to buy it that day. i'm sorry, i'll do better. he did. man of his word. >> they bought back a lot of stock. since the -- i'm sorry, my computer keep going dim here. >> that's okay. this is what i have to spend the time doing. since the barron's article, the stock is up dramatically. >> look, i got to tell you this is a company that is a very competitive company, and it is not waiting for the chinese consumer to turn around. yet the consumer is turning around, which is double whammy to the positive. the international is not bad. >> tomorrow when apple reports, positive commentary on china from them? >> yes. i would say -- we -- i say own apple, don't trade it. dialogue yesterday, the small semiconductor company that rippled through avago, therefore apple, people are saying, look,

there's going to be a dramatic slowdown in the apple build for phones because of dialogue. i think you want to counter that by saying, wait a second. if alibaba is right, the chinese consumer is strong. so therefore you may not want to read through that apple sales are that bad. i think tim took's interview this morning in the journal about the things in the apple pipe is saying can we stop doing this as a one trick pony? do we have to look at this as only the 19% growth in china? i don't know. they're trying to build a stronger case for recurring revenues away from phone. that's one of the reasons why with the multiple so slow you shouldn't sell it here. >> we will talk more about apple later. let's get to some industrials reporting this morning. dupont's third quarter operating profit came in better than expected. revenues missed. it was hurt by a stronger dollar, weakness in its agriculture business. ford's third quarter earnings

were shy of the consensus. revenues ahead of consensus. the revenuemaker says it had its best quarter ever. u.p.s. beat expectations on the bottom line, earnings. quarterly r lly revenue missed,s because of fuel surcharge revenues. >> only up 1.9%, operating profit declined domestically? not what i was looking for. you can read through fuel, but still -- these are numbers that are just -- that shows you the u.s. slowed. the durable -- we lump in the durable goods numbers, we could make a case that industrial america is in a recession. >> did you just use the "r" word? >> look at the cummings statement. look at oil and gas. >> what accounts for that? >> strong dollar. >> strong dollar in energy. >> boeing, if you smooth the

orders out, you won't feel that. i look at the dupont numbers. the dupont number is quite bad. it doesn't matter because dupont is in flux, breen -- there's stuff for breen to work with. i don't think -- i'm picking up on something steve liesman talked about, the industrial recession that he hears chatter about. housing was not so good. new housing numbers yesterday were not so good. autos still good. domestic number ford, a lot of people attributing the decline in ford to asia. you're getting the down side of lower oil, you're not getting the upside of consumer spending because back to school season turned out to be terrible. the post back to school season for department stores, abysmal. where is the consumer? where is the industrial orders? cummin cummings' commentary is so down. they're very good, very read through company.

i have to quote it, it's so bad. >> please. >> we are take ilking difficult actions to lower costs. firing people. markets have been weak for some time and are worsening, industry orders, key end markets brazil and china multi-year lows. i mean, there's some real negative news out there. >> some cross currents. >> yes. >> i like to use that word. >> if you're at merck, pfizer, bristol-myers, you're saying where is my bonus. >> we have to get to those. we will. there's a lot more to talk about. oil at 48.23. >> what is? >> oil. >> we're importing a lot of oil right now. the natural gas, people are talking about 1.50 natural gas. >> i know let's get to those pharmaceuticals. pfizer, merck, bristol-myers out with earnings and posting better

than expected quarterly earnings. pfizer getting a lift from oncology drugs, merck helped by lower costs. bristol-myers driven by results of its cancer and blood clot medications. all looking up. pfizer up quite strong. let's start there. i got some commentary on that. basically it looks like sales of prevnar were good. they beat because of better revenue. and they beat on gross margin. >> stroke drug, terrific. there was a great basketball player who played for the 76ers who recently passed away, moses malone. he talked about when they were on that great team, '83, '84, he kept talking about four, four, four. this is four, four, four. you know what they're doing it with? cancer franchise for bristol-myers on fire. pfizer, unbelievable pain.

this lyrica drug is unremarkable. the stroke drug is remarkable. all we ever do is talk about biotech, quietly these guys have built up their franchises. >> the coe, mr. reid likes to talk about the tax rate a lot. the fact that he's unfairly penalized by being a u.s. corporation, as opposed to some of his competitors. then we talk about mma what they can do to invert. it's a very small window. it's either glaxo or agn. >> floss peter parker e-mails at pfizer. a reference to valeant. listen to mr., mr. reid. start being proud. stop talking about inversion. that lyrica drug sun believable.

everybody who knows that drug knows it's a miracle drug. >> bristol-myers -- >> miracle. >> mirror caacle. >> the drugs are unbelievable, but the companies are so huge you don't get to see how great they're doing. mr. davis at merck, this is the quarter i was looking for. >> always remember the calls. pfizer at 10:00 a.m. >> you're right. but look at where j & j is going. >> we'll get more detail then. >> j & j -- i'm sorry, kent frazier at merck. don't know why i said davis. lilly, you have to circle back to lilly. you have to look at what these guys are doing. they're quietly building back their franchises. when frazier came out last time, he wasn't happy with the quarter. this diabetes franchise, very strong. so much here. >> you're making some big

statements. >> david, the stocks -- >> the old pharma companies are suddenly getting it right. >> reid and frazier, they are not chest pounding enough. someone has to speak up for them. >> they were both very good parts of a basketball team. i don't know how bradley awas. >> remember when he walked on in the end. >> of course i do. i'm talking about new york sports teams. we'll count down to the republican presidential debate. that airs tomorrow night on cnbc. we'll have a live report from the site of the debate. also ahead, t-mobile ceo john legere on earnings. he will talk to jim, that's later in "squawk alley." a rare "squawk alley" appearance for cramer. st

. the republican presidential debate airs on cnbc tomorrow night when it comes to the race for the white house numbers indicate an electorate unhappy with all of the presidential candidates. let's get more from aman javers.

good morning. >> good morning, david. a bunch of grumpy cat voters. a lot of dissatisfaction out there. that seems to be propelling the rise of donald trump and ben carson. this is some footage we shot last night. this is the actual debate stage where the debate will take place. you can see the ten podiums up there. still a lot of candidates in the race that are not named donald trump or ben carson. a new poll out from the new york sometime the and cbs lays out the challenge for the rest of the candidates who will be standing on that stage on the flanks of carson and trump. ben carson in the lead, 26%, donald trump 22%. this is the first time in months we've seen donald trump fall out of the number one slot. it will be a big blow to his company if that trend line continues. this is just one data point just now. watch for that to continue.

that will be the story line of this week. why is this happening? it's all of this dissatisfaction in terms of voters and frustration with candidates this time around. look at this graphic. it shows you a couple of candidates and how upset voters are with their choices. feelings here, optimistic, bernie sanders, 43. uncertain, pessimistic, 50%. ben carson, similar picture. 42% optimistic, uncertain and pessimistic, 50%. hillary clinton also a similar picture. uncertain and pessimistic for hillary clinton, 56%. she is 13% underwater there. it's a similar picture with the rest of the candidates. voters not happy. not settled on a candidate. you look at this poll, which shows ben carson up within the margin of error over donald trump.

you get a sense that the voters here have a shallow feeling about all of these candidates. they can move a lot. we will see in this debate whether they move again by the end of the week. >> eamon, while we got you, in terms of news, there it is, your money your vote tomorrow night. give me a quick take on the budget deal that is apparently very close to being done, if not done. >> absolutely. it's amazing what can happen in washington when there's a deadline that's real that the political leaders feel. in this case the deadline was the exit of speaker of the house john boehner leaving by the end of this week. they'll elect a new speaker of the house. boehner said he wanted to clean the barn and get rid of all the issues that have been dogging the republican majority, such as the debt ceiling, the spending and budget bills. boehner was focused on getting this thing done before he left. lo and behold it looks like we have a deal now. we'll see the details come out

and who is opposed to it. >> that's a big one. doesn't seem to be having much market impact. thank you, eamon javers. >> the marketses may have thought this was a done deal already, right? they might have baked into the cake that they would get to something in the last minute. >> yeah. >> we talked about that yesterday, david. we were trying to figure out whether it was baked in. i felt that the market should have been more excited about this. we have a durable goods number that is weaker. i thought it was positive. this could have been the so-called black swan out of nowhere it isn't. people people are caught up in earnings. earnings are mixed. >> i agree. if we were dealing with a debt ceiling problem a week from today, it would be a big deal. >> the conversation would be difficult and dire. >> yeah. >> it's a bullet -- it's missed. it's a bullet that misses. meantime i think the debate will be interesting in terms of just t

the -- eamon talking about how down everyone is. we're down yet employment -- down yet there's a lot of good things happening in the domestic economy, in housing, autos. it's trucks, oil and gas, manufacturing where the weakness is. if you're in those industries you're down. in the other industries, not bad. >> we have so much more to get to, including cramer's mad dash. we count you down to the opening bell. look at futures. we're back on "squawk on the street" after this. the possibility of a breach can quickly become the only thing you think about. that's where at&t can help. at at&t we monitor our network traffic so we can see things others can't. mitigating risks across your business. leaving you free to focus on what matters most.

♪ >> about six minutes to the opening bell. marvel won't be marvelous at all today. >> no. they're talking about how western digital, sandisk tie up is not good. the accounting firm, pricewaterhouwaterhousecoopers . i'm calling out a red flag. >> i don't blame you. it's typically not a great sign. >> no. >> do we have more information than that? >> no. what's interesting is that there was very little short position. no one saw this coming and a lot of people felt this was a takeover target even though it was down a lot because of so much consolidation in the industry. red flag, my feeling has been accounting regularities equals sell, even here. >> even here. >> that's the thing, why not a big short position. they're already down 35% for the

year. >> we talked about the dichoto y dichotomy, strong colldollar hurting. people say how can this one stay independent? how are they able to be standalone? the answer is because nobody wants them. >> all right. that's always good for about 20% in a stock when your accounting firm says over and out. >> it's -- we haven't had this in a long time. >> no. >> we have the opening bell about 4 1/2 minutes away on "squawk on the street" and a lot more to get to. stay with us.

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you're watching cnbc's "squawk on the street"s is, live from the financial capital of the world. the opening bell will ring in about a minute and a half from now. whenever it's the two of us --

it's not that often -- i get to turn to you and relive my youth and relive some of your youth and ask you, what is the key to this market? >> you won't want it? >> give it to me. >> it's still valeant. >> why? >> because you can't have the drug stocks go up until this thing is off the agenda. because people want drug consolidation. they want it so badly that forget about earnings. >> i'm getting out the old valeant file here. quickly looking. i have so many different notes on this thing. we'll see if it stabilizes. they'll have an awfully long road back. i think it's fair to say you have a board that signed off on a 10q the other day. i said the other day i don't think it's fraud. just a lot of questions about the business model, the earnings power and their ability to get back to following that model that enabled them to do

acquisition after acquisition in part because of a stock price. they did do acquisitions for cash as we. >> yes, they did. the health care segment wanted to get to hca, that segment has been down. that's a huge part of this market. we need to see them. i guess i would talk about cummins, if we were a great manufacturing country again. valeant is important. amgen just had good news about a phase two heart failure. it has to do will valeant buy this guy or that guy. >> not buying anything for a long time. >> look at that celebration there. you heard the opening bell. you saw the s&p 500 realtime exchange at hq. at the big board, it was gold corp doing the honors. our friend, john legere there, all those -- is it purple or

pink? >> pink. >> pink. >> magenta. >> i think he will have to answer some questions about churn. >> let's look at tmus. the stock -- first time in a while i can remember them reporting a quarter where you didn't go whew. >> they have a 3.6 churn, i got a 1.33 churn. this is moving from one guy to another guy. we have a 1.46. at&t and verizon are probably thinking how do we tell the story, because people don't know how to tell the story. john, he's still got the ads. he's adding people left and right that does matter. ebita margin, up 600 basis -- i think people are look at earnings per share. 15 cent -- people are looking for 30 cents. a lot of asterics at&t doing

better than people think. at&t is not about going out and buying a dish, it's about fanduel, draftkings, directv. >> a holy owned subsidiary of at&t. >> i'm talking about a preponderance of this country wanting to watch frooootball ga out of markets. >> talking about holy owned subsidiaries, we're one of the comcast market. this morning, comcast reports what i'm -- listen, it's the hometown team. take it for what it's worth.

a couple hedge fund managers said results are good. video losses slowed, declined to 48,000. everybody is losing video subs. that's the story of slimmer bundles, cord cutting. 41% improvement from the third quarter of 2014 in terms of losses. they added 320,000 high speed internet customers. >> let's stop right there. that's huge. >> buyback was higher. revenues higher. >> cash flow. >> the call is on going. stock not doing anything. >> cash flow. brian roberts talking about the huge upflow of cash flow from nbc. i come back to the idea you want high speed internet because of netflix, whatever. it's extraordinary. people want high speed internet. they love it. it's something people don't think about enough when they think about a cable company. >> it's like water. you have to have it. >> you do have to have it. >> if your cable goes down, you're not -- you might not know it. if your broadband connection

goes down in the house -- >> it's a panic. >> you need it restored immediately. >> i have backup. >> you have backup? >> i have backup. >> do you have some guy who cranks a generator? one of those things -- >> i have backup. i've got backup verizon. >> you got backup. >> i have to. it's too dangerous for me not to have it my life would not be the same. there's the wife, there's internet. >> there's the wife -- which comes first? you don't have backup for her. >> she's turning 50 this weekend. >> my god, you got to share that publicly. >> i mean 40. 40. 40. >> she doesn't watch. she never has seen the show. doesn't know about this. she knows i have money. doesn't know. amazing. four years, when she catches on to this i'll have to change my attitude. don't you tell her. >> don't you worry. secret safe with me. >> promise me? >> yes. >> carl -- so close to

mentioning the show. i always pull him back. >> good. let's keep her in the dark on the fact that you have a television show in the morning as opposed to as well at night. hca up a bit. the hospitals, we know, crushed last week. hca pre-announced community was a disaster. tenet hasn't reported yet. it got crushed. $3 billion buyback for a company that over the last few years has already bought back 24% of its market cap. >> private public buyback, they're doing it again. >> they are. they are. they do generate a lot of cash. that's a big number. 3 billion. another 11% of the company. >> what is the stock doing? stock is up. stock is up. >> a little bit. little bit. >> yep. a lot of people own that, big fund managers get hurt. >> what are you doing? >> i don't know. >> airplanes going to land here. >> i don't know. what do those guys do? >> bosses weighing in on that

wife stuff. i better be careful. >> let's get to some other stocks. grub hub, that's not pretty. >> geez. david, everyone is in that business, delivery business. everybody and his brother in that business. 50 guys! 50 guys delivers! and you have the regular guys! >> there it is. grub, not good today. >> this was a period -- there was a window when companies came public. they have not made you money. how about that. >> that's a good point. >> right? >> they have not. >> talking about companies that came public and didn't make you money and then did, didn't. alibaba up almost 8%. back to 82. >> how is yahoo!? look at that. >> yahoo! up on alibaba. >> is that better programming at yahoo!? >> must be. it does show you the importance of president 384 million shares that yahoo! owns that it will be

distributing into a separate company. with or without an irs ruling. not worried about it. taking the opinion that -- >> chinese stock market stopped going down. why it stopped going down, i don't know. you remember how we were worried that was hurting the consumer? >> we. were. >> the chinese stock market has been okay. >> from china to apple. reporting after the bell tonight, but we'll be sitting here analyzing it tomorrow, at least i will. what are we going to hear from apple? you know what is your expectation here? >> i think the issue is apple is they have to get off the treadmill of cell phone sales. they have to say, listen, you take a larger perspective, 12, 13 times earnings. if you analyze every single week of china data or get a number from us by looking at suppliers or sticking your fingers in the wind and saying i think people are using samsung, get away from that. you own the stock. could it go down? look, if i were tim cook i would

say, guys, no guidance. berkshire hathaway. >> really? >> really? the largest market cap company in the planet? >> i would say, listen, we're doing well. we have a multi-year game plan. if you just look at us from day-to-day, you will miss the big picture, as so many people have. >> that may be true. there are those who would simply say the law of large numbers and we're living in a world where you're simply going to have slower e.p.s. growth for this company. it's deserving of this multiple. >> i'm not denying if you look at it as a cell phone company, that you're going to max out. it doesn't have that beautiful subscription revenue that people like so much. does it have cloud? does it have mobile? yes. social? needs more social. what are you writing down? >> symbols, things i have to get to. coach. >> i'm talking to you. >> i'm listening. by the way, like hillary clinton, i can do two things at once. i can listen to you. >> what do you got there? coach had a better than expected

quarter, they actually reaffirmed. they reaffirmed which is unbelievable. >> coach -- >> they reaffirmed! >> is this the first glimmer of hope for coach? >> yes. that's the right way to look at it a glimmer of hope a glimmer. the rest of the group that been horrendous. have you noticed the weakness in accessness or focussed on it? >> no. >> you ought to. coach is making a comeback. >> it's more than a glimmer, it's a comeback. >> they didn't cut numbers. it's been a serial cutter of numbers. >> are they getting merchandising right? >> no inventory problem. a lot of these accessory companies have had bad inventories. there's inventories throughout the system. that's why the money wants to flow back to the drugs but they can't get conviction because of vrx. >> it's so interesting that you think that's the key to the market. valeant is up ever so slightly. 1.5%.

ackman is having a call now. i'm sure that's -- >> ackman is having a call -- >> i'm sure mike pearson rues the day he got involved with ackman. >> at one point algen is like yahoo!. he's doing something for you. >> he is. you think he would want to take that pfizer stock if they offered it to him? >> it's a research play, not a tax play. pfizer is doing better than the pfizer coe wants to say. he's a complainer. >> he's a complainer. >> he do not like the u.s. tax code. >> i don't like that. never explain, never complain. who said that? >> i don't know. >> henry ford. bristol-myers up nicely. >> it is. something was down 18%.

but i didn't get to write it down. >> there is? something down 18%? is that a mystery chart of the day? cummins down 10%. >> what was it? >> i can't hear them. let's look at cummins. >> console energy. >> see, david -- >> no wonder i couldn't hear. >> david, if it's coal, if it's coal, turn it off. natural gas -- do you know they had the biggest fine in the history of the united states in utica -- do you know what happened? >> yes. >> we are lower than coin -- lower than coin. cheaper than coin. >> i'm looking where we are right now. >> bigger than u.s. steel. >> bigger than u.s. steel. >> we have crude down 2.5%. 42.90. natural gas -- do you think it will go below two? >> will absolutely go below two. absolutely. eqt has dollar natural gas. you could -- we are burning more

natural gas as we just flair. and they can't build natural gas plants enough. i'm trying to do a switching analysis how many of these utilities can switch from coal to natural gas. coal is finished. finished! read my lips. >> you said it before. you will say it again. >> finished in this country. >> is coal finished? >> yeah, coal is actually finished. natural gas is so cheap, these railroads, i don't know if i want to own them. they all had radical revisions for coal, but they haven't taken it low enough. that's why that duke purchase was so important yesterday. >> by piedmont. >> it was overlooked. utilities are so important. i had american electric power on last week. they have a huge coal portfolio, a fleet they like to call it. a coal fleet. >> the fleet. >> like the combined fleet that went against trafalgar.

you know, nelson, trafalgar. >> yes, admiral nelson. >> once more to the breach -- >> no, that was another guy. >> don't confuse things. the fleet is sinking. like the combined fleet of france and spain. >> i'm trying to access the history part of my brain. you try it. you try it. you try what i do here with him. >> the energy stocks and industrial stocks are lagging. >> thank you. bob pisani, we didn't get to everything this morning. >> i'll try to fill in the gaps a bit. good morning. a little bit of weakness overall. it's obvious why. look at the sectors. we have oil trading near the low end of its recent range. that's weighing on energy. the industrials are having problems because the industrial numbers have not been good today. that's really what's going on here. here's the problem. let's look at a few of them. i wanted to concentrate on the revenue numbers here. dupont came out, beat on the top

line, revenues on the light side. cummins, beat on the top line, revenues notably light. paccar, revenues light. te textron, beat on the top line, revenues low. corning, top line good, revenues light. bottom line, okay. this is what i call a revenue recession. i'm sticking to my point here, you can look at some of the other ones coming out with issues here. so, look at where we're at now. we're at roughly 19 times forward earnings on the s&p 500 with revenues declining and margins near a record this is a problem. margins near a record high. you have to defend the record high margins what do you do? you start announcing a lot of cost cuts, that's what we're seeing. dupont, they beat on the top line, light on affirmed earnings, but taking a fresh look at cost structure and

capital allocation that means layoffs again. by the way, currency impact this year they said is 72 cents. they will make roughly 2.75, 8 2.80. they're saying revenues would have been 25% higher if they had not had a flat currency. look at cummins, you can't blame everything on the dollar. couple minutes was light on the top and bottom line, they lowered guidance and talked about brazil and china orders -- orders, not currency, at multi-year lows. and they said it was showing no signs of improvement. they also were looking at restructuring and cost cutting actions. another company, paccar, revenues light on expectations. their guidance indicates u.s. and canada, retail sales, not currency, retail sales below 2015.

that's why it's down 4%. some companies are mixed. te textron, big in commercial aviation, they beat on the top line but revenues light. bell was very weak. some parts were okay, like the commercial aviation, the beechcraft, the cessna business. that's doing well. textron systems is doing well. so a mixed report. other companies had weak revenues. masco should be killing it. they had earnings on the weak side. they continue to say they're optimistic because they're in a great industry. but masco had revenues that were on the light side. here's the score card for revenues. i know everybody wants to talk about earnings. the q4 numbers since i put this up one week ago, the estimates have gotten worse. now at 2%. they were at 1% more than a week

ago. four consecutive quarters of negative revenue growth, now we have companies coming out startinging to talk about additional cost cutting measures. the dow right now, down 45 points. david, back to you. >> thank you very much. let's look at oil prices, for that we are joined by jackie deangelis. >> good morning. oil prices trading under $43. not surprising we're seeing a slide here. the close yesterday under 44 was critical. now there are not many catalysts influencing the market now. the focus is going back to supply and demand. what do we know about the supply story? we have a bit of a glut on our hands. traders are looking to the api data this afternoon and the d.o.e. inventory number tomorrow. last week's data, not very encouraging at all. a huge build. we had flat u.s. production and only one rig came offline. the demand side, not very encouraging either. i do want to highlight bp

earnings. they did beat, more spending cuts, cap x for 2015. probably 19 billion. this is the third time the company has cut cap x, about 6 billion down from the original forecast. the question now is if this will be that second leg lower that people have been calling for. do we touch the 30s? it's difficult to say now the momentum is to the down side, but remember, fed on wednesday could keep the dollar low. back to you, david. >> thank you very much, jackie deangelis. coming up, co-ceo safra catz on how they're looking to get a leg up on the cloud competition. proud of you, son. ge! a manufacturer. well that's why i dug this out for you. it's your grandpappy's hammer and he would have wanted you to have it.

it meant a lot to him... yes, ge makes powerful machines. but i'll be writing the code that will allow those machines to share information with each other. i'll be changing the way the world works. (interrupting) you can't pick it up, can you? go ahead. he can't lift the hammer. it's okay though! you're going to change the world.

welcome back. let's look at shares of jetblue this morning. that stock down almost 7%. again, after earnings were disappointing.

and ben baldanza of spirit airlines on tonight. spirit talking about things as not robust. the airlines had low multiples because they deserved it. delta and southwest are doing well. >> we still need to look back and whenever it was, two, three years ago after a couple mergers, we say that was it. that was the line. >> value guys have to look at this group. american air. way too cheap on a multiple basis. understand that if you add a lot of capacity, you take a lot of the quick upside out. >> have they really added that much? >> jetblue. not everybody. >> right. >> be careful. we have stop trading coming up with jim. the only way to get better is to challenge yourself,

and that's what we're doing at xfinity.

we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. time for jim. where are we headed? >> we talk about apple, the bar has been set high. gm set the bar high for ford. asia wasn't that good. u.s. terrific. f150 good. just be careful in selling it. if china turns around, you will regret it. at the same time i understand gm was so much better than expected, people figured it had to be good. when the bar gets set high, i will mix metaphor here, then you

get trouble. idti up today because the bar was set so low on -- after yesterday's dialogue number. idti is wireless. when you have everyone coming in with a full head of steam thinking that gm is so great, ford will be better because the f150, big international companies. asia, latin america still a problem. let's wait for the cfo before we bail. >> okay. okay. he'll be coming up with phil lebeau later. he'll have john legere later also. that stock also getting hit. >> these are not easy to understand companies. do you want that growth? do you want churn? do you want how much money is being spent? do you want magenta? do you want excitement? do you want periscope? do you want a guy on a spin bike saying good things? do you want fabulous pictures? do we just want good tasting tuna? >> all right. we'll see you tonight on "mad."

>> thank you. >> that's right. he'll be with john legere. coming up, breaking news on consumer confidence.

good morning, welcome to "squawk on the street," i'm david faber, along with sara eisen and simon hobbs. we are live from post nine. carl is on assignment in colorado for tomorrow's presidential debate. we'll see him on the show, of course, tomorrow. let's give you a look at some of the markets, including the stock market, which we tend to follow here at cnbc relatively closely. a look at the broader market. s&p down about 0.25%. wti, a bit of a story yesterday and today. not long ago it was close to the $50 mark. now 42.89. some concerns about the industrial economy. >> breaking news on consumer confidence.

jim iuorio. >> our second disaappointment in the form of consumer confident. we were expecting 103, it came out 98.6. this is disappointing the one thing we were hoping for is the consumer felt good when you consider stock prices are buoyant now, home prices are buoyant, gas prices are low. the last consumer confidence number was the michigan sentiment a couple weeks ago, it was good. this is disappointing. the stock market started out down on the s&p, now it's down three handles. ten-year yields went from 2.031 to 2.029. yields going a bit lower here. the richmond fed came out also. we were expecting down three, came in at down one. that's better than expected. consumer confidence numbers are a bigger deal. that's a disappointment. >> thank you very much. second one of the morning.

shares of alibaba surging after sales rose 32%. helped by mobile sales. here with us to talk about this stock and what it means for china from las vegas is gi gill lorea from webb bush securities. everybody was concerned about the slowdown, the chinese consumer and the chinese economy. then alibaba had pretty good numbers. should we stop worrying about china? >> not quite yet. alibaba had good numbers. this is a quarter where they started caring about the shareholder. margins held up. they bought back stock. they communicated during the quarter to assure investors that everything is okay. volume growth went down to 28% from 34% the previous quarter, and 50% a year ago. the chinese consumer is slowing down, so is alibaba's volumes. however they did deliver a good quarter. >> what are they doing right on

mobile? >> they're really able to convert their entire business to mobile. more than 60% of their volume is coming through mobile. they've been able to rebalance the marketing spent from the retailers more to mobile than desktop. desktop modernization has gone down, but mobile modernization has almost caught up to desktop modernization, which a year ago almost seemed impossible to do. they did a great job of getting sellers to spend money on mobile marketing. >> let's talk about the stock, gil. this has been a crazy one to follow. one of the most hyped ipos ever, over a year ago in september, ran up, one-year anniversary came back down below the ipo price. barron's said the stock would fall 50%, and israelied back strongly since then. where are you now on your valuation? it looks like you're lowering target here and staying neutral. >> i'd say the stock is where it needs to be now. there was too much hype at

beginning. they were growing at unsustainable rates. then everybody got too discouraged as the growth slowed down. as they stabilize at these 25%, 30% revenue growths, slightly less on earnings growth, they're trading at the mid 20s on earnings. that's about a fair multiple. they've become more of a clean play, a very good fast-growing company tied to the chinese consumer. they're priced right right now for the growth rates they have. you mentioned mobile modernization. it appears the take rate has stabilized. do you expect them to continue on that, so that will no longer be a concern for people as they transition from being on desktop to mobile? >> it shouldn't be a concern any longer, but there's not that much headroom. there's only so much they can raise the modernization rates. they have good competitors. first and foremost, jd.com, it takes a lot of marketplace

sellers from them. if they raise prices too much, they'll be at risk of losing sellers. they can raise them a bit. they stabilized them. but it's not a lot of source of upside going forward. >> gil what about the acquisitions, $15 billion to date and counting. do you regard jack ma that longer term he will be in the right place or is this a different kettle of fish? >> i think that mark zuckerberg and sergei are great analogies for jack ma. he's a big thinker. he thinks well ahead into the future. he's actively through each 5:zigs tra5 acquisition transforming his business where he wants it to be in 10, 15 years. >> what about singles day? last year, 9 billion in sales for alibaba what can we expect

this year. >> they're trying to take it global. i doubt they can grow in china more than last year, they grew 60% last year. expect more countries where singles day becomes a thing. people start shopping on that day. alibaba for now at least owns that concept, should benefit from it. >> gil, thanks for joining us from vegas. $75 price target on alibaba stock. >> appears we're moving towards agreement on congressional leaders on a two you're budget plan. but representative paul ryan, presumably to be voted as speaker of the house, was talking about his frustrations with the budget process. >> i'm reserving judgment on this agreement because i haven't seen it yet. i want to see what it looks like on paper. the process, i can say this, i think this process stinks. this is not the way do the peoples business. under new management we will not do the peoples business this

way. >> okay. the budget vote is expected as early as tomorrow, then the vote for speaker of the house presumably, paul ryan will take it, that's on thursday. sticking with politics, of course, we are just one day away from the cnbc republican presidential debate in boulder, colorado. our own eamon javers is live at the debate site. the first time many of us have had a chance to look at it. >> that's right. what you said there with paul ryan and what's going on in the basement of the capital building is so similar to what's going on here at the debate site. this is the year of the political outsider. paul ryan now running sort of as an outsider but going to takt u take the ultimate insider job. the republican debate tomorrow night, and candidates running for the president of the united states. look at the stage we have set for tomorrow night. the podiums are up. there i've been calling them podiums all morning. i'm told these are technically

lecterns, not podiums. there's about ten of them up there. we'll see ben carson and donald trump at pole position in the middle of the stage. all candidates by poll numbers fanning out through the rest of the wings. we have a big change in the story line. just this morning a new poll out from cbs and the "new york times," this one is fascinating. look at these numbers. you have ben carson now at the top of the republican field nationally with 26% of the vote in this cbs/"new york times" poll. donald trump number two at 22%. that's the first time we've seen donald trump fall to number two in some months. it upends the story line there. look down the list, marco rubio, carly fiorina, jeb bush all mired in the single digits there. their big challenge tomorrow night will be to do something to break out of this battle that has become a battle between

number one and number two. >> i'm wondering how trump and carson will ultimately square off? clearly trump has been more aggressive over recent days. >> yeah. absolutely. we saw trump over the weekend with this interesting move, raising a question about ben carson's religion. he's a seventh day adventist. trump saying he is a presbyterian, doesn't know about a seventh day adventist. a lot saw that as a megaphone to evangelical voters saying that carson may not be one of us. carson urged trump to back off of that line of attack, trump said he went going apologize for it. in fact, he didn't say anything negative about the religion, he just raised a question about it. perfectly innocent according to donald trump. these two guys have been at each other. i think you can expect that will continue on the stage. carson's big claim to fame is he is the mild mannered soft-spoken

one. he's not triumph the insult comic dog up there. you can see him take that more deliberative posture tomorrow night. >> donald trump is good at raising questions as he might say. we'll leave it there. thank you. remember, of course, cnbc's republican presidential debate is it tomorrow night, moderated by our own carl quintanilla, becky quick and john harwood. coverage begins at 5:00 eastern on cnbc. when we come back on "squawk on the street," cheap fuel proving to be a double edged sword for u.p.s. the cfo joins us for a cnbc exclusive. shares of u.p.s.

this morning. beating earnings by two cents per share thanks to international, but domestic ground delivery dropping for the first time in over four years. joining us now is the new cfo at u.p.s., richard peretz, also incoming member of cnbc's incoming cfo council. nice to see you on air. >> thanks, simon. >> let's concentrate on the part of the business that is shining. you could hear that on the conference call, that's

international with double digit profit growth despite what's happening in canada and germany. give us a little victory lap there. >> the international segment for the third quarter in a row has had double digit profit growth. you know, a large part of that is our european model. and our continued growth in europe on transborder product and it's driven by the same business trends that we're seeing across the continent, that is the trade between countries. so much of our europe business stays in europe. the other part is we're creating network efficiency throughout the network and making the adjustments we talked about where growth was in europe and u.s. imports. we're also seeing a softening out of asia. as a result, we adjust our network and reduce the number of planes we're flying so we can have good bottom line growth. >> richard, a lot of people are focusing inevitably on what's happening in this country and

the read through for the transport industry in particular. the b-to-b side of the business, not b to c which is doing well with retail, ground volume down for the first time in 4 1/2 years. on the conference call it was projected negative industrial production for the fourth quarter. what's going on. >> exactly. right now we have this balance between b to c or e-commerce. industrial production is down. it was down for the third quarter. there's an expectation it will stay down this quarter. it's really being driven because of the strength of the dollar and the weak global demand from a manufacturing side out of the u.s. so that has an impact. today over half of the volume is b-to-b volume. we have a direct correlation between what's happening with industrial production. that being said, we have good

growth, our best growth in b to c this year. when you think of this-year and last year, last year had tremendous growth. our third quarter was the largest quarter of growth in the last four years in 2014. when you stack the two years together, we're seeing almost 4% growth. we know it was softer this year. we know we had some tough comps, but we also know that the b to c market is continuing to grow. we're participating in a big way. >> the defining challenge for you and fedex is what happens in the holiday period when all these consumers are ordering stuff online. you are now saying -- it's the fact that you double your normal daily volume. let's get that out there. you're projecting that this year you'll have 10% more packages. the crucial question, in two years you struggled with this badly. the question is, "a," having gone to the consumers, trying to calibrate what they'll send you, and what days they'll send it on, and where they'll deliver it within the network, are you

prepared to turn around to them and say i'm sorry, this is above our forecast. we're not taking those deliveries. >> simon, we've actually spent the last year getting ready for peak season and making sure we're balancing the network efficiencies that we've added by adding new buildings. we will have ten new buildings that are automated. they will handle more volume quicker. we've been collaborating with customers since the spring to manage demand and capacity. make sure that we're think being which days of the week the volume comes in. >> sure. >> i think when you put those two together, we actually have a good plan that is in coordination and in alignment with customers so that we can deliver almost 630 million packages to the end consumer for christmas. >> do you think there will be a pilot's strike this christmas? >> despite the news articles that you read, we are continuing to negotiate.

we are under the railroad labor act along with the national mediation board. negotiations are continuing. we believe the best place to do the negotiations is at the table and we actually have two more meetings scheduled this year, both in november and december. we expect to get a solution that's a win for customers, the pilots and u.p.s. >> okay. let me talk finally about drones. you guys don't like talking about drones. amazon and walmart are able to get a lot of press coverage from their plans for drones. you guys test every innovation. we have a picture of a drone that you actually used. i think you used it in your warehouses in atlanta to check the upper reaches, the top shelves to see what room there is and what is there, to double check the bar codes. where are you on drones and putting them in service? either for emergency situations or as walmart or amazon would

have it for curbside delivery. >> it's a good question. probably not a week that doesn't go by that we hear about where do we sit on drones. it's a promising future but for humanitarian and warehouse we see a great value to it. at the end of the day, the judgment that our service providers make as to whether to leave a package, to enter a building with multi tenants is important for customers. while there's a use for drones in our network, we don't see the sky full with thousands of drones delivers packages, how will you get up the elevator and to the front door of that apartment. and our driver is an important -- service providers of the value proposition we offer customers. the end user is expecting that driver to bring the package and have it there when he is at home. >> richard that wasn't so bad, was it? tv interview done, after the conference call, straight on to

cnbc, it's all over for another quarter. nice to see you. >> richard peretz, thank you. when we come back, the tobacco sector outperforming the s&p and fellow consumer staples in a big way. tobacco is up 20% in 2015. one of the best performers, reynolds american. we have an exclusive interview with the ceo. another earnings exclusive coming up on "squawk on the street." in one day, the republican presidential debate, tomorrow on cnbc.

the market is losing more steam. the dow down 56. day one of a two-day federal reserve data. steve liesman has more results on the new cnbc fed survey. >> we're factoring out a rate hike this year. i want to show you the outlook for the s&p 500 from our cnbc

fed survey respondents. it stopped dropping in terms of the outlook, but it's -- the outlook for this year is only 8 points higher by the end of this year. 2071 is the current level. come over here and look at where we started. the outlook for this year in december was 2194. we have 100 points out of the outlook for this year. a similar story for next year. a bit more robust. 2166 that is about a 4.5% rise if that comes true next year. nothing to write home about. look how much has been baked out. 2311. quite a bit of optimism, but that's come steady down. the stock market is discounting or taking out the idea that a rate hike is coming. we asked our panel, 41 economists, fund managers and analysts, 33% say the stock market is discounting a rate hike. that's down from 56% in the september survey. look right here, 60% say the

market is not discounting a rate hike. look at the outlook for treasury, the outlook for the yield on the ten-year has come down, along with the outlook for stocks and the economy. 2.2% is the expected level for the end of the year. 2.04 is where recloswe closed y. 2016, 2.7%. look at how much has been baked out. 3.5% was the forecasted yield for the ten-year in 2016. that's all the way down below 3% for next year. one thing i want to show you is this idea. some think the fed is paying too much attention to the market swings. we asked this question last month, 43% said that. now 60% say the fed is paying too much attention to market swings. sara and folks over there, you can read all about this, simon, on cnbc.com where we have the full results of the cnbc fed

survey. where you also will find they pushed ahead the forecast for when the fed will do that first rate hike from november to december. >> it's interesting, i wanted to bring up the point, when you talk about the relationship between the stock market and the federal reserve, we were in that weird period where it seemed like equity investors wanted the fed to raise interest rates, now they're not expecting the fed to raise interest rates, and, boom, we have a rally. >> there was a period there for two days where it seemed like the market changed its mind over what it wanted from the federal reserve that gets to the last question we talked about. this one behind me. is the fed paying too much attention to market swings? nobody in their right mind can figure out what market wants. does it want a better economy and slowly rising interest rates, or a worst economy and no

rising interest rates. >> the argument is nobody knows what the fed wants. the greatest danger in what you've just laid out for us is that tomorrow they signal that unless there's a rapid deterioration in the economy they will hike in december. nobody expects that to happen. very few expect it to happen. that's where verbally they still are. >> that's not quite right. simon, just to push back a bit. our survey shows that 49% of respondents, to the extent this represents wall street, we have talked a bit about the difference between the economists and the analysts and the traders and where they are. there is a big divide on wall street with 49% expecting a rate hike this year in december, the other half expecting it next year. >> as you point out, fed fund futures with a much lower problemibility th probability. straight ahead, apple stairs taking a dip ahead of its fourth quarter report tonight.

was do you do with the stock now? what do you do with the stock tomorrow? more on that after the break. ne. ne. huh. the good news is my hypertension is gone. so why would you invest without checking brokercheck? check your broker with brokercheck.

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good morning, everyone. i'm sue herera, here is your cnbc news update. house speaker boehner says congress has a deal for a budget. he said there's no reason why any republican should vote against the agreement.

chinese warships have given warnings to a u.s. navy ship as it patrols closely to china's man made islands. the chinese defense ministry saying they would take all necessary steps to protect that country's interests. afghans are assessing the damage to their homes and towns in the aftermath of yesterday's earthquake. the 7.5 magnitude quake killed more than 300 people in the region. it was centered deep beneath the hi hindu kush mountains. and six pairs of giant panda twins making that public debut in southwest china on monday. photos and videos of the twins posted online and the public has been invited to choose their names. twin pandas have accounted for 90% of all panda births in china this year. that's the cnbc news update. simon, together with me, awe.

>> you can't beat panda pictures. >> you can't. >> why are they always born twins. interesting. >> thank you, sue. >> you're welcome. >> yes. apple is reporting its latest quarterly earnings after the bell tonight. the stock is up slightly today, had a rough day yesterday in anticipation. a lot of focus is going to be on iphone, growth in china and indeed software updates. let's meet the hardware analyst at rbc capital markets. he's optimistic on apple. welcome. >> thanks. >> the main thrust of what everybody seems to be focusing on here is the idea to whether or not iphone sales which is the bulk of the profitability and the bulk of the business, whether we'll see a sequential downturn in sales. do you think that's possible? do you think we'll see that on the fourth quarter projection

tonight? >> yeah. you're right. all that matters is what iphone units do. we're more optimistic, we think you'll see flat to low single digit growth out of the iphones in the december quarter. if you look at the data points, sales have been strong. tim cook's comments on china until september have been positive on the pun side. the third element i would point out is you actually have more selling days for the new forms in the december quarter this year versus last year, which should be a win for the company. i think flat to up a little in iphone units is an expectation. >> for investors that are watching now at home, they may have a longer time horizon of 18 months, two years, three years. do they separate from the fast money, the hedge funds and analysts in that they may say, okay, we're down for the moment. that's simply because we had such a great iphone 6 launch

last year. i believe -- this is what analysts can't say, i believe they'll do it again with the iphone 7 next year. i'm buying in now on the basis that there will be great ideas and great innovations ahead. >> absolutely right. if you take a longer term perspective, things like moving up the memory configuration on your phones is massive for apple. the iphone leasing program, which i think will get more and more momentum going forward will reduce the replacement cycle, help iphone sales, i think if you look over the next one to three years, i get iphone 6 is a tough compare, but there could be mid single revenue growth. >> since iphone is everything, can you explain how investors are supposed to interpret these results from suppliers and chipmakers? dialogue yesterday, weak

results. apple stock got hit 3%. how often are they correct in terms of being a barometer for the iphone demand? >> if you look at dialogue, 80% of revenues come from apple a good indicator of what's happening with apple. revenues in december quarter would be up 2.5%, 3%. now, the caveats with this as you would imagine. inventory rebalancing, how much that is a reflection of not just demand but what apple is doing with inventory. there's some caveats to it. with 80% concentration investors clearly took interest yesterday. >> your $150 price target, trading at 115, what time period is that over? that's not to the end of the year, is it? >> no our targets are typically -- as is the case with apple, over the next 12 months, we expect apple to get to about $150 number, which would be about 15 times a $$15 times a $

potential. good to see you, sir. busy evening for all concerned. thank you. >> thank you. we are keeping tabs on the housing market. new home sales took a dive last month and builders are still well below normal production levels. that's why some are pulling out all the stops when it comes to exciting potential buyers. for some it's the kitchen. diana olick has that story. >> we may be in a suburban warehouse, but according to poulte, we are in the hub, the kitchen. according to them, your kitchen speaks to who you are that is your personality. so, this is the first time the home builder has done this, kitchen throwdown, that is inviting suppliers like whirlpool, moen, electrolux and

kohler to design kitchens and run focus groups through them. are you a young, married millennial? a downsizing baby boomer? a parent? do you entertain or not the life of the party? you are a foodie or do you cook to survive? it is marketing to the buyer's personality, a strategy particularly ur jept ngent now the builder's numbers are disappointing. here's what the ceo of pulte thinks is driving demand. >> you don't have a lot of urgency. buyers are saying if i don't buy today, maybe in a couple months from now it will be just as good a time. >> he actually believes that slightly higher interest rates might get some potential buyers off the fence. what they want to do now is create that urgency, create that excitement and do that in the kitchen.

simon, i'm thinking that this kitchen really represents "squawk on the street." it's got the gray for the markets and wall street and the bar with the ice sunken right into the island. back to you. >> i'm never sure -- they used to say it was bathrooms and kitchens that sold apartments. i know people who never go into the kitchen. >> for me, it's the closet. they're in the wrong place. >> next year. >> up next on the program, reynolds american getting a boost in the third quarter thanks to pricing of its newport brand. the ceo of reynolds american will join us for an exclusive interview next on cnbc. ♪ today, we're seeing new technologies make healthcare more personal with patient-centric, digital innovations; from self-monitoring devices that can interpret personal data and enable targeted care, to cloud platforms that invite providers

to collaborate with the patients they serve. that's why over 90% of the top 25 global pharmaceutical companies are turning to cognizant. our domain experts, technologists, digital and data specialists, clinicians and scientists are transforming the way clinical research sites collaborate with pharmaceutical companies, and enhancing patient engagement with innovative platforms and solutions. our population's growing healthcare needs present growing opportunities for our clients: to advance the future of medicine with digital, and improve the quality of lives. ♪

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it's a great school, but is it the right one for her? is this really any better than the one you got last year? if we consolidate suppliers, what's the savings there? so should we go with the 467 horsepower? ...or is a 423 enough? good question. you ask a lot of good questions... i think we should move you into our new fund. sure... ok. but are you asking enough about how your wealth is managed? wealth management at charles schwab. good. very good. you see something moving off the shelves and your first thought is to investigate the company. you are type e*. shorten the distance between intuition and action. e*trade.

. apple is the big mover tonight. markets in negative territory. look at the health care sector trending higher today. dom chu has more. >> the only seblctor in the s&p 500 that is positive is the health care sector. among the leaders, edwards life sciences and pfizer, merck and bristol-myers. those stocks are up between 1% and 3%. year to date the sector is in the green up by 2.5% making it the fourth best performing sector in the s&p 500. so, despite the recent weakness in headlines around biotechnology, health care trying to hold up as we approach the end of the year. back over to you. >> thanks, dom. reynolds american out with third quarter results, earnings in line, beat on sales, and the company narrowing its forecast raising the bottom end of the range. the stock is off this morning

but still one of the best performers in the s&p this year, it's in the top ten. the stock up 54% in 2015. joining us now for an exclusive interview as always, susan cameron, ceo of reynolds american from winston-salem. good to see you. >> good to see you, sara. >> can you talk about what drove this quarter? it looks like newport was the crown jewel. tell us about how the integration is going and why that is the bright spot right now. >> yes, thanks a lot. the integration of newport, the last time i spoke to you was in the summer when we closed the transaction. so this is our first full quarter with newport. our adjusted earnings are up 17%, up 18% for the year. this was the first full quarter of newport volume. we have seen newport's market shares up half a share point, that's accelerated momentum since it has come into our stable. all the brands in our portfolio, the growth brands, have had a strong quarter.

good net pricing, good margin improvement we're delighted with the new portfolio. >> overall, i mentioned the outperformance of the sector in general. you confirmed that in today's release, better sales, better volumes, better pricing. some might be surprised to hear in this age where we're all sort of more obsessed with health and wellness that it is such a good time for the cigarette industry right now. why is that? >> i think what you're really seeing in the industry is not more people using necessarily, you're really seeing a trade up in premium mix. so, the economic tailwinds and lower gas prices, people are trading up. trading up from roll your own, trading up from little cigars. that's been strong for traditional combustible industry. >> and i guess the concern with investors, your stock is down 3%, but i mentioned very strong performer so far this year. is this as good as it gets?

can you tell us anything about the outlook on pricing? on volumes? what you're expecting to see? >> as you mentioned, we did lower the bottom end of our guidance. we're projecting for the year an increase between 13% and 17% on eps growth. so, we announced this quarter as well a $5 billion cash transaction. we are selling the brand natural american spirit in the overseas markets. we are keeping it here in the u.s. our investors are pleased with that result because the use of that cash, we have continually demonstrated that we will return value to shareholders, so they see very strong prospects on the horizon. >> what about e-cigarettes? the growth was so strong, people were really optimistic, but that rate has slowed down. vus is your brand. one of the leaders. when does it become profitable? >> we're actually very close. we put in some efficiencies into

the operations process. really this whole e-cigarette vapor space, vues is the number one brand by a long margin. consumers are trying vapor, interested in vapor, and vapor needs to satisfy the smoker. we continue to believe that vapor and e-cigarettes offer the potential to reduce harm for people who have used traditional combustible. we launched four new flavors for adult consumers. and we continue to see momentum on vuse. but the space got very saturated very quickly, so inventories have pared back. the consumer still wants an alternative to a combustible product. >> there's some talk that people who were using the e-cigarettes are actually going back to traditional cigarettes. is that happening? >> what we do see is people using multiple product categories, experiential,

depending on the situation. but really people are substituting and consumers continue to state that they desire an alternative that satisfies them. we continue to invest in invasion, to enhance that vapor experience. that would be good for public health and good for smokers. >> i mentioned pricing which has been quite strong for you and your competitors. three big players virtually control this industry. that's been good. how long are you going to be able to continue to raise prices? >> well, the industry, of course, has been in secular decline for decades. and, of course, pricing and volume form an equation. our margins are also very strong. so, you see -- we have seen combustible cigarette price increases year on year, slightly ahead of inflation. and we would expect that to continue. a lot of this net pricing realization is about how much

discounting and promotion is being done at the retail and at the consumer level. and we have seen relative stability in that environment for the past 18 months. we're pleased with that, our brands are growing in that environment, and we're seeing trading to premium volume. natural american spirit grew 20% year over year. that continues to be popular and in line with macro trends. so we feel we have a strong differentiated portfolio, options across the price space. and we have a very positive outlook for the business. >> susan, thanks for joining us as always. susan cameron, the ceo of reynolds american. up next on the program, 75 million millennials will clearly be pivotal to the presidential election. one tech ceo has some advice for the candidates on how to better connect with the young, bright

things. z zillo's spencer razkoff will join us live. sure, tv has evolved over the years.

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just many time for the candidates to hit the stage in colorado tomorrow. one tech ceo out for words of advice on how they can better connect with millenials. he penned his tips is zillow group spencer from seattle. spencer, you got a lot of them at your company, of course. you are well-versed in the language of millenials, if you will. what do they like to hear? >> they mukt through text, social media, short captions. they value brevity, consignificance, authenticity. the political rhetoric that appeals to baby boomers and genx and geny, they want a politician to address them like somebody talking to a friend. that's the communication style that resonates with millenials.

>> i always wonder about the effectiveness of those ads that can typically tear down an opponent and build up the person who the ad is for. how do they respond to those given they can often not be how you just described, they like to hear their candidates? >> well, increasingly mill enwrals aren't watching as much tv as prior generations. the ability to reach the millenial audience through a 30-second tv spot, that's rapidly eroding. increasingly, they're focused on social media and other short form video content throughout the web. politicians are changing not just their political communication style, but also their advertising tactics to try to address this largest generation. there are now more millenials than any other cohort. past elections have been influenced by retirees or by boomers or other co-horts. this is ages 18 to 34. >> authenticity, spencer, isn't just about brevity, is it? it's about a feeling. it's about an angle. it's about a desire for change. it's about maybe a view that half of capitol hill is rigged.

even baby boomers might feel that. >> think about ross perot connected by just being a straight shooter. that is tried and true, but millenials in particular know no other way. that's the only way they want to be xhublgtd with. >> who is the millenial pick? donald trump or bernie sanders? the people that talk sort of the most bluntly? >> well, it's a little too early to say. i mean, trump and sanders are certainly appealing to millenials by being blunt ask direct, but the history of candidates like this, whether it's ross perot or howard dean or even john mccain to some extent is that typically their direct communication style gets coopted by the political mainstream, and kind of the mavericks end up fading as the mainstream co-opts -- not just the communication style, but also the political positions of

the extreme. it's a little early. we'll learn a lot more tomorrow at your debate, of course. >> something occurs to me. they don't vote very much. when you look at the actual numbers in terms of 18 to 34, they are not showing up to the polls. >> they care about different issues than politicians are talking about so they care about rent affordability. they care that 30% of their income of average americans' income is going towards rent and historically it's been 24%. because of their increased rent payments, they can't afford to pay off their student loans. i mean, they care about gun control. they care about slightly different issues than your typical, you know -- your typical voter. if you want them to vote, if you want to activate this cohort, you have to talk about stem education, student debt, rent affordability, domestic issues that affect them. that's how to actually catalyze this generation. >> i want to talk about something you know a lot about. the housing market.

we got higher prices in the form of s&p kay shiler this morning, but disappointing new home sales last month. where are we in this recovery? is there a reason to be concerned? >> the housing recovery is on solid foot, but it's pretty boring now. home values are appreciating sort of 3%, 4% year-over-year, can and that's normal. huge upturn during the bubble, and huge downturn, and now we're plodding along 3%, 4%. that's okay. rent affordable, in many parts of the country people are paying 40% of her monthly income for rent versus the historical average of 24%. where does that 16% come from? it comes out of discretionary purchases. that's what impacts the economy in a recession overall. we need to be talking about rent affordability. we had millions of americans no loer owning a home that moved into renting, but we didn't build millions of more rental units so rents went up. very substantially. these are the types of issues that affect not just the economy, but also the election and i hope that we talk more about these issues at the debate

tomorrow. >> yeah. well, we'll -- we will be watching and hope the seam. spencer, thank you for your insights. >> whether you are a millenial, a generation x, or baby boomer, you'll hear from donald trump and the other gop candidates tomorrow night during our own cnbc republican debate coverage. it begin at 5:00 eastern. >> wonder what the baby boomers want to hear? david. >> david. >> i'm going to beat the hell out of both of you. that's what i'm going to do. that is just so low. i'm leaving. i'm leaving. i'm just leaving. >> you won't want to miss the interview we have coming up on "jack ali with safra catz. let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings.

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