stories that have people talking. lots of buzz on twitter about halloween. google launching the fright geist which tracks the most searched costumes nationwide. to determine how original or unoriginal your halloween might be. what does that have do with willie geist. >> nothing. happy halloween. >> change your clocks. >> so you can watch us in the morning. join us on monday. "squawk on the street" begins right now. happy halloween. >> me or you? >> good friday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. a lot to work with on this last trading day of october. earnings from exxon, chevron, linkedin and starbucks. we will talk to howard schultz this hour. ten-year is up to 2.17. getting more creeping signs of inflation in the u.s. and

europe. chicago pmi in 45 minutes. sales beat for starbucks, comps up 8%. stock is down in afterhours and is clawing back. >> valeant makes another controversial decision and is cutting ties with philidor. monitoring bill ackman's conference call. >> and linkedin and expedia, both stocks spiking. we'll hear from both ceos late their morning. data shows consumer spenting rose only 0.1 in september. bo bo stocks are on track to extend that weekly winning streak to five and post the best month in four years. best dow names? dupont, followed by microsoft, followed by ge. >> okay. let's talk about those.

ge, the execution, getting out of financial. dupont, that is breen, going to break up the company. these are very, very important. >> also both large trian positions. >> trian has -- nelson peltz has made a lot of good pushes. done a lot of good things. i think breen, without peltz on the board, will follow peltz game plan. even though dupont had a miserable quarter, ed breen issued by any means necessary a malcolm x phrase -- >> i'm aware of that. >> you like to use that. draghi used it. draghi used it. >> he did. i don't know that he knew the origin of the phrase. back to breen. >> breen is going to be ceo. these oil companies, chevron! they have -- chevron! that was incredible how good

that quarter was. >> like the royals. >> you had go there? 2:49? >> they were like the patriots. >> yes. >> patriots. i wish the nfl never had fined -- >> i will remember this moment. >> i was out of line with that. >> 100 days to super bowl. you mentioned chevron, 1:09 beats 76. exxon, 1:01 beats 89. chemicals downstream making up for everything else. >> marathon cut the dividend yesterday. rather big cut what did they do? they split up between refining and marketing. the combination made sense. chevron made so much money in refining and marketing. this model works for them. chevron was able do what i wait for some to do, just shut the tap off.

boom! boom! cut out billions of dollars in spending. oil should be going up on these quarters unless you think iran -- iran is important. these guys shut the tap. >> except the "wall street journal" has a story quoting a lot of different management at oil companies saying they don't see 60 bucks as logical proposition for the next year. >> a $30 scenario is not going to happen. i think oil is correctly priced between $45 and $50. last year, chevron, $90 a barrel. we know world growth is slowing. >> saudis keep pumping. >> saudis are fracking now. >> i didn't know that. >> it's pennies. you haven't heard this story yet. i didn't mean to break this story here. i've been working on this for months. >> tell us. they have possibly another 200 billion barrels if they use the modern fracking technique that a company that i follow -- i don't

want to say which one. but it is -- it's historic. the amount that saudi arabia can pump is far greater than they realized. why are you looking at me. >> i'm thinking about saudi arabia and money they can spend on things that are not necessarily in the interest of our country. >> they're at war with yemen. you could argue they're the good guys. you could also make a lot of other arguments. >> it's not the time. i already went to the royals with you. i don't want go to the saudis. you'll completely trash me. >> at the same time, names like eden and colgate-palmolive where the dollar and -- eden says the majority of our markets experienced weaker conditions guiding guiding 1.05 to 1.15. >> i will say this, it must have been raining on eden's side of

the street. kmart blamed the weather. ge is in a lot of those markets. emerson, there's a have-have not in the industrials that's happening that we have not seen in some time. w >> who is on the have side snchblgt. >> ge, honeywell, boeing. all on the have side. this defense budget will skyrocket. you know, you don't see either party wanting to cut defense in the time when the adventurism is by russia, iran. by china, this chinese navy. we don't talk about it enough. i have -- >> we don't ever talk about the chinese navy. >> no. >> tell me about it. >> you're in a quizzical mood. >> it's friday. it's been an interesting month, which we are going over. the performance of the s&p.

>> read "ghost fleet" we'll have a change of heart. >> don't leave me hanging, what about the chinese navy? >> the chinese navy, there's not going to be a showdown, but the chinese navy is becoming -- i've never seen china in this much of a imperialistic mode. i think our navy will have to respond. there are key shipping lanes that are not going to be -- should not be challenged. look out for this defense. how does lockheed martin barely go down when northrop grumman won the biggest contract ever. we're still using b52s, and that's not a signing group. this defense story will be the story for 2016. >> starbucks posting quarterly earnings in line, revenues and comps in forecast. but the holiday forecast is below consensus.

we will talk to howard schultz later this hour. 40 to 45, estimates 47. comps up 8, china comps up 6. >> starbucks will be up big. that story about what they guided versus the truth is wrong. we'll prove that. the guide was so far up i questioned whether howard should have gone that high. i will. the linearity of the quarter was so great, you will see high single digits. a lot of question people about the china number. this stock could end up big today. the headline numbers that sent the stock down to 60, i checked it out. 1:14 in that conference call where they basically said, listen, we said single digits, we're wrong. we're guiding up dramatically. it took my breath away how the engine that -- 9% comps come in. this was an extraordinary -- this was the best quarter i have

seen starbucks have. >> you mean relative to expectations? >> yes. the best i've seen. europe is amazing. china is good. spending a lot of money for mobile ordering. this by far the best quarter i've seen. >> markets not treating it that way. >> the market doesn't know jack. >> do you buy these arguments that the tax rate suis unexpectedly low. this is about volume, my starbucks rewards, the taste of drinks, the ability to raise price. the ability to create an experiential situation where you want to go to the door, it's about breakfast, lunch, dinner, about the remarkable resurgence in europe, japan, it's a clinic. it's a clinic -- >> it's a clinic. they need starbucks on those

chinese naval destroyers. cruisers. >> you can make fun of me. >> i'm not making fun of you. you're sharing all sorts of things today. fraccing ing fracking in audi arasaudi arabi. >> i was jumping up and down last night. i said in my world this is it. this is how you conduct a conference call. an hour and a half conference call. an hour and a half of my life. movie over, i started it over again. this was it! this was better than "banshee." you probably don't watch that either. valeant, a few days ago before we left for denver, it was the key to the market. >> was it ever. >> then we didn't -- >> pfizer called brent saunders. >> wow. pfizer and allergen, not that we didn't know it was coming --

>> you said it 100 times. give yourselves credit. >> valeant looking down again it touched 100 in the premarket, though seems to be above that level now. it announced its terminating its relationship with the specialty pharmacy philidor it had put 100 million into that, had an option to buy it for nothing. they said we're done. philidor says it will shut down operations as soon as practical. valeant shares have taken a hit. really over the last week, certainly over the last few months. last week a short seller suggested the company may have fraud fraudly overstated revenue by using that company. giving detail in terms of the relationship with philidor, for a company that trades at a low multiple to earnings, but even though 5%, 6% of its revenues were going through this specialty pharmacy company

nonetheless it did contribute to -- those revenues were important to growth, year over year growth and a number of key medicines, jublea, for example. an argument had been made -- they did this when they bought medisis. it was a competitive advantage for us to have philidor particularly as related to dermatology products. people are particular about what they put on their skin. >> no my wife had new york for medisys. this part of the -- >> yesterday you had all the pbms cut their ties with philidor saying we're no longer going to be backing it. this morning a significant statement. this thing moved along at quite a pace. >> is the flash flow real? >> 7% of their ebita came from this. >> is the cash flow real?

how do you feel about the cash flow? >> how do i feel? >> we were worried. >> these there are guys who hav work for valeant, two guys on the board, their reputation is tried up in this thing. mr. ackman, say what you want about him, he'll talk on his conference call -- apparently they didn't start yet because the website crashed. >> are you serious? >> he usually does a good deal of work. allergen came at them hard trying to find a smoking gun. they didn't do that. they questioned the business practices. >> david piatt who was running allergen at the time raised some serious questions. >> which were all valid does that mean that there's fraud? in other words -- i don't think so. >> that's the most damming phrase you can use. i won't be like citron. >> does the quality of the

earnings come into question without a doubt? >> yes. you throw a bomb -- you use that word enron. people went to jail for enron. let's take that off the table. until, you know -- i think you have to take it off the table until you have much mofre of a smoking gun. you had pharmaceutical stuff before and people were severely punished, major u.s. attorneys get involved. >> on the drug pricing issue, of course which started this selloff in the stock to a certain extent, with the massachusetts aig, new york -- >> these are all still civil. it's not criminal. >> just subpoenaing documents. >> very important to watch. when we come back, linkedin surging on its latest results and guidance. we'll hear what the ceo told cnba. the dow and s&p barring a disaster today will have the biggest monthly point gains

ever. mo more "squawk on the street" from post nine in a minute. you like that pretzel? yea. 50% more data for the same price. i like this metaphor. oh, it's even better with funnel cakes. but very sticky. get 15 gigs for the price of 10. and now get $300 credit for every line you switch. now at at&t

. shares of linkedin up sharply in the premarket. the professional networking website raised their full year

guidance and beat the street with their results with growth in mobile and international. this is what jeff weiner told julia about their advertising business. >> our native advertising business is the fastest grandmothering. will continue to invest there aggressively. in particular we want to focus on driving higher roi for customers. >> revenue growing almost 40%. >> almost no display ad. this is a great subscription business. i have to tell you, there was a quarter not long ago where i read it over and over. i didn't understand it at all. a lot of people didn't, the stock got sold down. this was proof positive of the changes they made. this was a strong secular growth story. i don't like to buy stocks up 11%, but this was a remarkably good quarter and explains that this belongs in the social/mobile cloud theme of companies that are having a

dramatically good run of things. >> reacceleration on all fronts. >> amazing thing. >> trying to leverage the corporate business. we always talk about mobile. linkedin, 17% of time spent is on mobile. facebook is 76. >> look, they'll get there. there's a lot of things going right for linkedin. they also don't have great tailwinds going. china, very strong. there was just remarkable quarter. most importantly, you realize that a lot of things that were not clear about what they were spending are paying off. most of these companies have way too much exposure to ads. the way ads work now, people just write a check to google and google sends you ads. to get away from ads is very smart. >> the main source of revenue is paid by companies looking for employees. >> right. it's down to 15%. >> is it that low? >> yeah. it's really impressive. this is a very, very good quarter. >> speaking of ads, yahoo! today, bob peck at sun trust,

wonders whether the board turns the core business over to somebody else and lets marisa handle the spinco. >> that was a very in his own -- in a subtle way, bob peck laid out that these guys blew it. >> i did not see the note. i'm curious, handling the spinco. that's not going to be anything except for alibaba. i don't know what you run when you run that. >> she doesn't really have a relationship with alibaba. >> yeah. she doesn't. >> no. she did do a good job in terms of -- >> i meant the fundamental company. >> no. no. you're a large shareholder and it's going to trade at a discount to baba shares, this overall company. >> people should read peck's note. i felt yahoo! was worth something. it's a thought out note.

when we come back, cramer's mad dash and count down to the opening bell. stay tuned for our exclusive interview with starbucks' howard schultz. that's coming up in a few moments. this bale of hay cannot be controlled. when a wildfire raged through elkhorn ranch, the sudden loss of pasture became a serious problem for a family business. faced with horses that needed feeding and a texas drought that sent hay prices soaring, the owners had to act fast. thankfully, mary miller banks with chase for business. and with greater financial clarity and a relationship built for the unexpected, she could control her cash flow, and keep the ranch running. chase for business. so you can own it.

chase for business. can a a subconscious. mind? a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit?

can a business have a soul? can a business be...alive? ♪ oh, it's friday. 9:23:30. six minutes to the opening bell. where are we headed? >> a lot of people negative about apparel and retail. they should go listen to the

columbia sports wear conference call like i did. this stock, you will see -- this is boots, also columbia -- a very high-end northface is the way i would put it. northface has high-end products, that's vf corp. vf corp did not have a positive quarter. there was a takeaway that perhaps this high-end north face apparel was another division that did not do well. this pcompany is firing on all cylinders. a lot of great clothes. their fabric can keep you warmer. if you're a technical outdoors person, like some of my family, this is the brand. this shows you you can have double digit momentum globally and by the way a lot of this is -- you have to order well in advance. the numbers will be good next quarter. >> had a strong year already. >> david, this is about execution, that's one of my themes. it's about having the right product in the stores. about freshness. about offering a technologically

positive form of clothing. you use these guys in an extreme situation as my daughter put me in recently when i went mountain climbing with her. i'm not a coward. >> no. far from it. i have some sorrel boots when i went to davos. >> the hat? >> not the hat. >> the hat. >> that's 20 years ago. >> i remember it like it was yesterday. looked like deputy dog. >> i thought it was the manchurian candidate. >> it was the conrail meeting in philadelphia. negative 3. >> negative 3, you wear their stuff. vf corp, maybe we have to find out more about what happened. >> we have the opening bell a few minutes away. followed by an exclusive interview with starbucks ceo, howard schultz.

you're watching cnbc's "squawk on the street," live from the financial capital of the world. the opening bell in a minute and a half. as we close out the month of october. a lot of news from around the

world. boj holds steady, even though they bring don't inflation outlook. inflation in the eurozone works back to the flat line. that's seen by some as a positive. >> i hope the euro doesn't get too weak. when you listen to the conference calls, it's so clear. i had avnet on last night. gave any some good insight. their strongest market is europe. when you translate back, it's not the strongest market. the u.s. will become the strongest market. the currency is that weak, even though that's where they're doing the best, it doesn't reflect it in the numbers. keep in mind that the euro has got to stabilize against the dollar. >> 27 days until black friday. deckers, not bad. >> wasn't bad. >> 1.11 beats by a nickel. >> target yesterday announcing free shipping versus walmart for $50. brian cornell, saying listen, we

are a factor. those who think that walmart is only being besieged by amazon, look again. target is back and excited. >> walmart one of two dow stocks red for the month. that's saying something. there's the opening bell. a look at the s&p 500 at the bottom of the screen. at the big board today, jay johnson doing the honors. at the nasdaq, scholastic corporation celebrating the book series and movie "goosebumps. "quht i ha >> the big red dog. >> clifford. >> he's on his game now. >> we have not done ea. 65 cents beats by 20 cents. another beat and raise for the week. >> the stock is down, but really down because the stock had such a run. the fact is that the physical games did well. i tell people right now, buy

ga gamestop off this. this gamestop is not done going higher. there is a huge short position, but they have go to some gamestops. good company. great quarter. $45, not too late to buy that. >> expedia, 2.07, beats by seven cents. >> simon has them exclusively. that was a remarkable quarter, which they immediately talked about the competition, how it's going to put pressure on them but they'll be ready. that was a fantastic conference call, too. >> got a little bank mma from key. >> keycorp acquiring first niagara. talking first niagara had 39 billion in assets, 29 billion in deposits. cash and stock deal. 6.8 keycorp, 2.30 in stocks and shares. how is the acquirer's stock price doing? in this case, pardon my turn,

not so good. >> no. >> down 6%. >> a lot of people thought booth moony might want to break up the brand. that's not her strategy. the bank is cheap. every bank is better if we have higher rates. this deal is not being greeted well at all. bbt has had a series of acquisitions and was greeted a bit better. >> we will the not see this at the top tier. those guys were all done. nobody is doing deal there's, except if they're selling something. >> and you would have to take advantage of this because the scale of a wells or bank of america, jpmorgan is so big, you have go wherever you can to beat them. they're so powerful those companies. >> colgate-palmolive one of the losers. almost 3%. the fifth quarter of a decline in quarterly sales. >> i have to figure out what's

going on there. colgate was always the leader. procter struggling. unilever has come back. pullman has to do more work on colgate. the three standouts are pepsico, clorox and kimberly clark. let's learn more before we dismiss colgate. good company. >> we had tepper on "squawk" this morning. didn't want to talk about the market too much. i bought a lot of carnegie mellon. >> he said he was surprised by the dover tone out of the ecb but they remain cautious. >> i know david tepper, he schooled me at goldman sacks about some bonds i wanted to buy for someone. ever since then i've been in awe of the man. i think he was there to talk

about the incredible charitable work that he was doing which is a remarkable. a guy who goes ohhome, believes where he went to school. >> day two after news from pfizer and allergen confirming friendly talks. 3.08 is the number there. many are wondering what the price would be paid by pfizer. the likelihood would be all in pfizer stock. the combined company must be 40% of allergen shareholders, so they would qualify for inversion and become an irish taxpayer. pfizer shares down a bit. you will have a large spread here regardless if they get to an announcement because of the fear of politics. is it likely the treasury would change the regs again?

no. one of the key reasons pfizer seems to be moving now as opposed to waiting for any length of time to have gone by is that they want to try to close this thing before the end of '16, before a new congress comes in. working with the current map that they have as it deals with inversions and the like. we'll see. ian reid can be an emotional guy. astrazeneca, that deal fell apart. he gave them an ultimatum, some say something that shouldn't have been done. it's funny when we talk about valeant. i believe that if valeant had been successful in buying allergen, valeant may be the name we're talking about with pfizer. >> but they -- they would not led that gentleman run pfizer. >> no. >> reid would be willing to let brent saunders run pfizer. >> i agree. that's probably very true. that being said, the roll-up

strategy, you always have to think about your exit. roll 'em up, roll 'em up, use a high multiple stock. be willing to lever up my balance sheet, lever up, sell it. that's going to work for allergen. the old activists. >> jonah shack, who was medisys now friendly with brent saunders. has come on "mad money" a number of times. he's not going to accept anything below where he thinks the stock should be. >> what's that price? >> 3.50. >> i think the expectation is to get at least 3.80. >> yeah, minimum 3.50. allergen down in the last ten minutes of trading yesterday -- half hour of trading. saunders has built a company where he's using some big numbers for what they're going to do on earnings per share. aspirational numbers. he would be crazy to sell out at less than 28, 29 times earnings.

earnings power here is big. >> it is. when you get this combination together, some time passes after the inversion takes place. they would be expected to buy back enormous amounts of stock. >> yes. >> we never talked about how baxter g baxt baxter's c osheo -- there's som interesting mergers that worked. the pershing square call on valeant continues. kate has some of that at hq. >> carl, i'm here listening in on the call underway for about a half hour. i should say it got going late because there was such high qua caller volume and they were beset with technical difficulties. so far pershing square defending their considerable investment in valea valeant. however bill ackman noted that

valeant hinvestors need to know promptly when bad news occurs because anything less than full transparency could create problems for the company. this echoes something we heard within the last day or so from another large investor which said that valeant, why they believe valeant has operated within the letter of the law, needs to understand that sometimes that doesn't mean that you're creating shareholder value. and reputation matters. so far it would seem, carl, that ackman is agreeing with that sentiment. we'll give you other details as they emerge. >> thrilled to have howard schultz on right now. ceo of starbucks. they reported quarterly earnings that were pretty good. press reports say they were in line. but you have to look at comp store sales, hardly disappointing. they were shockingly aggressive. howard, what happened during the

quarter as it went on? you were able to put up what i regard as being numbers that were far better than you even thought you could do just three months ago. >> jim, thank you. as you know, we guided all year long at mid single digit comps. so to come in at 8% comps globally, 9% for the u.s., which is a stunning number. but the number that got the street pretty excited was 4% incremental traffic at a time in america where, as you know, most retailers are struggling. we're creating multiple day parts throughout the day. seeing success with the food, evening program. but i think the big catalytic change in the business is what's going on with mobile payment, which is now 20% of tender. and the fact that mobile order and pay, which has been rolled out all over the country is very significant. and we're processing about 5 million mobile order and pay transactions a month. that is going up almost every day. in addition to that, emea is a

significant great story within starbucks. despite all the concern and the chatter about asia pacific and china, we had a strong asia pacific quarter with 6% traffic. so you roll that all up, starbucks, we believe we're sitting in a unique position. what i mean by that specifically is here you have a company that has a global footprint of 23,000 stores, that is invested ahead significantly ahead of the mobile technology curve and we're at the intersection of our physical footprint and digital technology curve. i think we're the leading company, certainly in the u.s. and probably the world, of being a mobile first technology consumer-facing retailer. >> howard, because i know people were saying, jim, you're too bullish on what happened in china. you did say there was some softness and it got stronger.

i think that people want to know whether there was a slowdown because china had slowed, yet somehow you were able to get more people to start going to breakfast or team meetings with the families of the starbucks people will make it so your faith in starbucks is accelerating in china and will happen. >> our china business was strong throughout the quarter. but i think as we shared with the street on the call, we saw an excacceleration throughout t quarter, and we also kind of tipped our hand a bit and said that we have seen a reacceleration in the month of october that just ended. let me give you a statistic that i think could be easy for you. there was a lot of noise about the fracturing of the stock market in china. certainly that's real. when you get underneath that, only 6% of households in all of the country are invested in the stock market. i was fortunate enough last month to be part of the summit

with president obama chi in seattle. heard firsthand about his view of the growth of china. when i heard him say we're seeing with 300 million middle class chinese people, that will grow to 500 million to 600 million within ten years, you really have to play the long game. we're sitting with almost 2,000 stores, opening a store a day in china, winning in terms of the equity of the brand. beginning to see the morning day part take form and our success in china, though it's not a given, we have a great opportunity to build a major business. it's not out of the question that china one day will be larger than starbucks in the u.s. >> one thing you talked about a couple years ago was the idea of the mall traffic. bricks and mortar, to get it so people still go and not be irrelevant, you need technology and experiential change. but you also talked about the need -- we don't talk about this

enough, for really great tasting coffee drinks? what starts this weekend that has always been good for you guys? >> there's no doubt that everything we have to do as a company is to invest in and enhance the core reasons for starbucks success. that's the investment in our people, the culture, values of starbucks. and obviously continuing to reaffirm our leadership in all things coffee. if you look at the innovation of starbucks across the board, innovation of partners, innovation in terms of coffee and coffee beverages and technology, we are, as i said in the call, playing the long game, investing ahead of the curve. at the same time putting up the kind of comp store sales numbers all over the world with 4% traffic. we do not have a company our scale -- even coming close. our peer group is putting up numbers of slow single digits. we're at 8 and 9.

we had great courage to say on the call, we have guided mid single digits for the bet every part of a decade, and we're seeing slightly stronger comp store sales than that and guiding the street slightly up for '16, so comps will be higher than mid single digits. we are feeling good going into the holiday season and the year. i'm sitting in phoenix today because we're trying to use our scale for good and attack a serious problem. there are almost 6 million youth in the america not at work, not in school. opportunity youth. we have to do everything we can as businesses, once again, to recognize that we have a responsibility to kind of reengage with the community, not wait for government and help these kids get a job. we have convened over 30 great companies, non-profits. we did this in chicago two months ago and we'll continue to make sure that starbucks as a company achieves the fragile balance between profit and conscious. >> let's talk about the fragile

balance. to me, my biggest concern is -- i heard it on many different quarters, including yesterday at buffalo wildwings, the minimum wage is going up. you have always paid well above that. you always offered much better benefits. as everybody else goes up, you have go up again, howard. when do those costs for labor get to the point where you have to say, sure, same-store sales are going up but we can't make as much money as we thought? >> i think as a company, if you look at the history of starbucks of providing comprehensive health insurance 25 years ahead of the affordable care act and this year along with a groundbreaking benefit providing free college tuition through asu for all our employees and then paying more than minimum wage, we have been a company, as you said, that has invested ahead of the curve with our people. there's no doubt that there is an income gap in america.

as a result of that states and local governments are attacking that problem. we're supportive of wages going up. we have navigated through things like this before we do not believe that -- i know this sounds trite, but we don't use weather as an excuse at starbucks. we're not going to use labor rates as well. we also said clearly on the call -- i think this is very important -- that by investing ahead of the curve with our people for many years and investing again this year, we're seeing lower attrition at starbucks, which is very, very different than most of the companies in retail and restaurants today. we have hard data that says lower attrition, satisfied people is linked to the success we have at same-store sales. so these investments are paying off whether it's for people, technology, the innovation on food and beverage. starbucks has a wing hand. we are maintaining a steadfast commitment to recognizing that

our success is not an entitlement. we have to earn it, earn it every day. i say to our people, we have to maintain humility but be as hungry as ever. we are just getting started. >> now, a few years ago people talked about you were maxed out in the united states. clearly there are no more stores that were needed. is an issue, now that you're having with -- my starbucks reward, with mobile pay, you're taking share from people. do you have enough stores to be able to make it so your through put and your lines are not so long that you begin to lose customers to another guy? >> i think these lines are a double edged sword. it's a good problem to have did, but we have to solve it. we will open over 500 u.s. stores this year on the backside of 500 stores this past year. the good news is the class of stores opening this year are the highest volume in our history, which demonstrates the fact that we have so much white space. as you said, a couple years ago

people said we were saturated in the u.s. we are looking to be aggressive in the u.s. the store you're talking about on water street is 30 yards away from another store. you would think we would have some cannibalization. we had zero cannibalization of all the stores we've opened this year. and i think that demonstrates that we have to be a bit more aggressive in opening more u.s. stores. but mobile order and pay will relieve the line. it's not going to add to it. and we're going to get better. i think what we said on the call yesterday which is important, we're not just creating a mobile and order and pay application. what we're creating is a platform. that platform is going to create more features, more benefits, more excitement for our companies integrating our loyalty program and i think what you'll see from starbucks in the years ahead is a seamless mobile centric opportunity for us to great the same kind of wonderful experience we created inside our stores on peoples devices and that's only going to add value

and increment taality as the starbucks brand becomes more and more relevant in peoples lives, not only in the coffee business but outside where they work, where they play. and we have a situation here where after 23 years as a public company, after 40 years of being in business, i feel for the first time we have line of site on a number of initiatives. we are beginning to hit our stride. >> all right. howard schultz, thank you very much. chairman, ceo and founder. congratulations on what was s initially viewed as a not so good quarter. >> let's go to the bond pits. rick santelli is in chicago. >> how appropriate coming off a coffee hit that we go to a half & half hit, but that's what's going on with chicago purchasing manager. it's half & half. five of the numbers this year have been below 50. five of them have been above 50. this one was above 50.

56.2, it is the second best number going back to january of 59.4. two day of tens on the rise. interesting pattern when you contrast it with the bunds. divergence. it's not only a movie but what's going on in bonds. if you look at may 1st, tens minus bunds, 160. it's breaking away. if bunds kept low as we diverge, what will happen? we'll be under pressure. back to you. >> we'll watch that number for sure today. when we come back, expedia, one of the biggest gainerers this morning on the s&p. we have an exclusive interview with the ceo. dow about did go positive but s off a bit. now down 6 points.

which allergy? eees. bees? eese. trees? eese. xerox helps hospitals use electronic health records so doctors provide more personalized care. cheese? cheese! patient care can work better. with xerox. that's it. how was your commute? good. yours? good. xerox real time analytics make transit systems run more smoothly... and morning chitchat... less interesting. transportation can work better. with xerox.

you wouldn't order szechuan without checking the spice level. it really opens the passages. waiter. water. so why would you invest without checking brokercheck? check your broker with brokercheck.

big gainers on the s&p 500 are all earnings beat.

first solar, abbvie and expedia in today with double digit gains for all of them. we're back in a moment.

mats on "mad" tonight? >> i wish i had abbvie on, the had a good quarter. we will have agco and eaton. >> looking forward to it. good weekend. >> hope to see you this weekend. >> yes. >> when we come back, the ceo of expedia. don't go away. when you're not confident your company's data is secure,

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. start looking for a house? oh did you see that listing on zillow i sent you. you see that bathroom? did we just decide to buy house? i think so. yay! find your way home. zillow.

♪ good friday morning. welcome back to "squawk on the street," i'm carl quintanilla with sarah silverman, david faber and simon hobbs. we will close out october today. some mild action at the moment. dow about 11 points to the down side, held up by chevron. oil back below 46. let's get to rick santelli. we just had chicago pmi, this time university of michigan. rick? >> yes. university of michigan, nice round number. october final 90. 90.0.

92.1 was the mid read that evaporates. 90 following the final read of septembered a 89.2. for the year, like many data points, january was a high watermark, 98.1. that was the best level going back to january of 2004. as for the market, interest rates seem a whole loss more concerned with the difference between ten-year bund rate as we diverge from what was the force that pushed u.s. rates down. simon hobbs, back to you. >> let's get detail on the trade from bob pisani on the floor of the new york stock exchange. >> 50/50 day here between sectors. we are closing out a tremendous month of october. everyone was pessimistic going in. look at the numbers. these are the best numbers we've seen for the month of october for any month in years. nikkei up almost 10%. shanghai, hang seng, germany the

best in several years. s&p the best. not the best october, but best month in four years. november is a good month historically. it always has been. there are a number of names including consumer stocks that do very, very well. we asked our friends at kensho to show us. look at these names. mattel, micdonald's, colgate, hormel. these are statistically significant numbers. we want to point out to you what's going on with some of these consumer names in november. we are had chevron and exxon and they surprised us here. they beat on the top and bottom line. upstream, that's the oil production numbers, that's below expectations. no surprise there. the big surprise is downstream. the refining business. much better than expected. the margins much better than

expected. exxon said the chemical business was better than expected. this is all good news here. they are dramatically cutting capital expenditures. chevron gave guidance. 2014 they pespent 40 billion dollars. in 2016, 25 to 28 billion. and 18, 20 billion to 24 billion. they will cut capital expenditures virtually in half. look at chevron exxon. they started on the upside. chevron was $67 at the end of gu. lows. colgate, jim was talking about colgate. their numbers were disappointed, sales down 8.5%. organic sales, excluding the dollar, huge. this is another company, the dollar is really impacting their revenues. you have to factor that in whim you consider the numbers on the disappointing side. let me point out what happened

today. there's colgate on the down side. crowd funding for the masses is coming. as we are speaking, the s.e.c. is set to vote on rules for final crowd funding abilities, small investors will now be able to raise debt or equity from friends, families, even individual investors. think of it as kickstarter for the masses, but in this case you get to own equity. the question for the s.e.c. is will they have enough protection in place to make sure the fraudsters stay on the sideline. this is an exciting development that's happening right now. guys, back to you. >> thank you very much, bob pisani. let's check out more on the stunning performance, we are bringing in jeff korzan irngs k and mikorzanik. did you santa claus rally come early. >> i think there's more life to

it. maybe not as rapid as a pace because we have to digest the numbers from the fed. >> we keep getting into this pattern where global margins disappoint, stock markets down, central banks to the rescue and we go back up again. >> the fed is the number one factor but also the actual data has comes through between here and december that makes everybody comfortable or uncomfortable. i think the market itself has to kind of settle out a bit here. this is a logical place for it to stall in the short-term. it got suddenly very overbought. you're starting to see investor sentiment get bright after being despondent a month ago. that's the understandable reaction. what that means is you may not have stolen the entire fourth quarter rally but you have pulled the good news forward. >> let's talk seasonality for the moment. last time we saw this strength was october of 2011. what happened next? november and december were pretty much flat, up 0.3%. >> we had a lot of political

concerns both domestically and in europe as well. we don't have those weights on us this time around. what is also missing from this discussion is the way people did run away from the markets. in august, they went overseas, they went to cash in some cases. i think not all of that money is back in. a lot of it will get back in. >> can i pick that point up? it's a great rally, what do we do to year-end? or the point you're making, it was a horrible august and we're slightly above the flat line for the year overall in an environment where you have massive stock buybacks. i'm not sure if you're healing what went before and therefor you can rally or we had it. it's a different perspective either way around. >> i go more with the healing and we can move forward from here. we had a big growth scare. the growth scare has passed. >> have we healed the underliniunderlying

problems we had in august? >> i think we have. and in some ways those problems were overstated. particularly with china. chinese policymakers have regained a level of credibility, which was a bigger issue. the fact that china will no longer have double digit growth has never been news. it's how the slowdown has been handled. >> one of the problems was emerging markets. a lot of it was tied to china but also tied to the ned. in the u.s. we've seen it in emerging markets, money flowing back in, but nothing fundamentally fixed in brazil or indonesia whose currencies were on the brink of collapse before october. >> nothing has been fixed but you can make the case that you have had an overshoot to the do downside in august and september. i think it's time to look at the rally and the inputs to that rally and say -- it's been a narrow rally in the u.s., mega caps bringing things higher we

have relief that nothing broke. we didn't have the credit markets start to weaken. the junk bond had its weakest day on october 2nd from here on out, it's a question of whether there is a broadening out of the rally. even if we get more of a fourth quarter rally, what happened the last two years? the fourth quarter rally stole from january. we're not out of the woods. the level on the s&p 500 was crossed dozens of times in the first half of this year. >> you're like an investor/encycloped investor/encyclopedia. >> the other side of in rally has been mega deals. just in pharmacies, food, chips, banks. do you expect that kind of feverish pace of dealmaking to continue. >> i think so everything we talk about now is what happens when you get into latter stages of business cycles.

you see instead of everyone winning, you see winners and losers. mega caps, we think china will be a winner, brazil a loser. all of that divergence is part and parcel of later stage business cycles. >> we'll leave it there. guys, thank you. early this morning, valeant announced its ending its relationship with the mail order specialty pharmacy company philidor which will shut down operations in what it says is as soon as possible. meg has been following this story for us. >> bill ackman on his call right now. valeant saying it is severing all ties with the philidor pharmacy, saying it's doing that after new allegations arose about philidor's business practices. this comes on the heels of a number of pharmacy benefits managers last night saying they are ending their relationships

with philidor over some noncompliance with user agreements in the case of cvs/caremark. some of the main questions now that investors have are did valeant turn that up, it's own looks into that company's practices. and will this affect valeant's growth at all? it says philidor accounts for 7% of its revenue in the third quarter, 6% year to date of revenue. some drugs like jublea, for toenail fungus, a lot of that flowed through that channel. a lot of questions about where the growth will come from. on the call now, bill ackman defending their investment in valea valeant. and for a while drawing comparisons with the rest of the industry saying this is highly regulated and a lot of fines are

paid. calling out novartis and saying essentially companies move on from this. we should look at rest of valeant's business. i'm sure kate kelly and i will bring you updates. very interesting situation this morning. >> it is. this relationship has been a competitive advantage for them that they saw when they did the medisys deal. they used this channel themselves. to your point, it's not necessarily the 7% of revenues, it's how much of the growth was a result of those revenues as well and how quickly were they growing and thenning the company put better numbers up year over year. >> it's a question about this model of using specialty pharmacies. clearly the way that valeant worked with philidor raised questions. ackman saying on the call that they didn't know about the option to buy this that valeant acquired last year. you have to wonder will this stretch into the rest of the

drug industry and the way they work with other pharmacies. >> thank you, meg. want to get to eamon javers in washington with some breaking news regarding the white house and syria. >> breaking news from reuters. they're reporting that the obama administration is expected to announce a decision to deploy a small number of u.s.-special operations forces in an advisory role for syria, this according to reuters. obviously the question of whether or not the united states should have boots on the ground in syria has been a significant policy debate here in washington for some months. as the administration where iss will how aggressively to go after isis in syria. reuters reporting that the obama administration will anounounce s decision to deploy a small

number of operation forces in syria. up next, expedia beating the street in its first report since the orbitz takeover. the ceo of expedia, dara khosrowshahi will join us after this. ♪ [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] ♪ my mom makes hospitals you can hold in your hand. ♪ my mom can print amazing things right from her computer. [ whirring ] [ train whistle blows ]

my mom makes trains that are friends with trees. [ train whistle blows ] ♪ my mom works at ge. ♪

top gainer this morning, expedia up 60% year to date a solid set of results from online travel giant. expedia raising full-year guidance while indicating that synergies from the orbitz brands will exceed previously stated $75 million. the ceo of expedia, dara khosrowshahi joins us now from washington. welcome back to the program. >> thank you for having me. >> the heart of what you're doing here, the heart of the quarter is the fact that there's no slowdown in the growth of which you're selling hotel rooms. that's the core of the business. up 28% year on year. when you strip out the acquisitions. that's a core, organic figure. behind that simple stat is a huge amount of effort what is working now for you? >> it's really about the product itself. we are constantly improving the product on the website and the

customer service as well in order to serve customers better and clearly they're noticing. that allows to us put more money into marketing. the increase in marketing expands our brands, expedia brands, hotels.com brand, travago brand you're hearing about and seeing. so more people come to our sites. the service is getting better. we're adding loyalty programs to that we have over 20 million hotels.com loyalty members. expedia's loyalty program is expanding quickly. last but not least, we are adding over 1,000 hotels into our inventory, on to our shelves so to speak every single week. when you add better product, stronger marketing, more loyal customers, and then actually expanding the availability of product, each one of them may be small, when you put it altogether, you get growth rates like 25% growth rate domestically, 50% internationally. it's all coming together well. >> at the same time the revenue

per room is down 15%. a lot of that has to deal with the dollar headwinds you face abroad but also because you're cutting commissions that you charge hotel owners to list their rooms. airbnb is in the space. they are talking about doubling the number of books they have to 80 million. that is surely a tough co competitor for you. >> the margin decreases we've been driving have been happening for some period of time. we're dropping margins in ord attorney more relevant to the smaller hotel. we are a great weapon for the independent hotelier, we wanted to drop price force them so they could do it more cheaply. airbnb is an alternative accommodation that we have to

take seriously. it's adding inventory. if you add inventory, you will add pricing pressure, but at same time you are inviting a whole host of shoppers. you can see our businesses are doing we right now we're all guns ablaze. >> it's a fast-moving industry. that's why the doj allowed you to buy the orbitz brands. let me ask you about another competitor which is trip adviser, which has had a staggering share price move this month since priceline said it would put inventory on trip adviser. why do you continue to boycott trip adviser with your own inventory. >> we don't boycott trip

adviser. we advertise through a click method. the issue we've had historically with the instant book product, it's confusing for customers as to whom they're doing business with. the goal of our business is to be very, very clear about what we offerer to customers, make sure that we take care of them. make sure we come back. we didn't like the instant book product for the lack of clarity, but we still advertise on trip adviser and still continue to do business with them. it's a good service overall. >> people look at them and say if priceline joined, and it made that difference to the market cap, then you as the other behemo behemoth could join the business. sitting back, that's what most l laymen will say look at the charts. >> we're not trying to move market caps. we're trying to build a great service for kurs mers. that really comes number one.

this is a huge industry. over a trillion dollar business. even though you have a number of big players, all of us can thrive. you have seen all of the various players thrive. we're focused on customers, partners and our decisions are based on that. >> in fairness to you, i want to come back to the technology, which you were explitt sit back in the conference call last night and the fact that you think it gives you an edge. you spent a lot of time bringing the brands on to one tech platform. maybe you gave up some market share during that when priceline was bolting businesses together in a discrete way. what are you able to offer now, not just to people clicking in order to ensure you get a sale in layman's terms but also to the independent hotel owners? >> we bring them real global scale. all of these platforms together essentially benefit the independent hoteliers, and the platforms coming together has allowed us to invest in tools

for those independent hoteliers. she are able to come on, use our epc app and see how many people are look at their hotel right now. how many people booked, how many people searched, what is their conversion, how is the conversion doing? can they improve content and pictures in order to improve business in general and in with us. a lot of the technology investment is aimed both at the consumers but also increasingly our supply partners and hotel partners. >> dara, good to see you. dara khosrowshahi, ceo of expedia. when we come back, big moves from oil names a top energy analyst is up next with what you need to know as chevron leads the dow. here at td ameritrade, they love innovating.

and apparently, they also love stickers. what's up with these things, victor? we decided to give ourselves stickers for each feature we release. we read about 10,000 suggestions a week to create features that as traders we'd want to use, like social signals, a tool that uses social media to help with research. 10,000 suggestions. who reads all those? he does. for all the confidence you need. td ameritrade. you got this. if ynow's the time to get your ducks in a row. to learn about medicare, and the options you have. you see, medicare doesn't cover everything - only about 80% of your part b medical expenses.

the rest is up to you. so if 65 is around the corner, think about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, they help cover some of what medicare doesn't pay. and could save you in out-of-pocket medical costs. so don't wait. call to request your free decision guide. and gather the information now to help you choose a plan later. these types of plans let you pick any doctor or hospital that takes medicare patients. and there's a range of plans to choose from, depending on you needs and your budget. so if you're turning 65 soon, call now and get started. because the time to think about tomorrow...is today. go long.

chevron and exxon reporting this morning. chevron is leading the dow. pavel molchanov, good morning.

were you expecting downstream to make up for this weakness? this is the stand-out. downstream and for exxon chemicals as well. this is amazing. exxon is supposed to be an oil company but the upstream business, the production was 32% of earnings. so, two-thirds of it came from everything other than production of oil and gas. that tells you it's a nice cushion to have. on the flip side, when oil recovers, obviously those downstream and chemical busin s businesses will become more of a headwind than tailwind. >> the chevron cap x guidance along with job cuts, was that within the -- your expectations? what does it mean going forward? >> it's on the steeper side. look, every day now we're getting reminders of how this industry is in austerity mode for a second straight year. companies cutting cap x 15%,

20%, 25%, these are large caps. for 2016 at least as much as they've been cutting over the past 12 months. in the case of chevron, the 25% cut is on the steep side. keep in mind they are finishing the construction of their biggest ever project in australia. so, that by definition will be rolling off. but the key point is they're not replacing that with new investments. they're simply taking that cash, putting it in the bank. >> can you give us a status report on the cash position of these major producers? the fear is they're not earning enough to cover costs. they also have to pay for buybacks and dividends what is the cash flow situation? >> because exxon is -- has such an overweight in refining and chemicals, it actually for the time being has a better free cash flow position. still not great. this quarter, for example, exxon

covered about half of the dividends through cash flow. in the case of chevron, they're still outspending cash flow because they are completing the project and another one called wheatstone. in the case of chevron, we're expecting a steep reduction in spending next year. they should be free flow cash positive next year. whether it cuts the dividend, that depends on where oil is. if it stays in the 40s, probably not. >> i remember when the word was exxon needed to hold 80. we're now back to 82 having worked our way down to the low 70s. is the coast clear? >> between these two stocks. chevron is a better buy. it's underperformed year to date, and chevron is much more overweight oil production than exxon is. to play the down cycle, exxon

was a better trade because it's more defensive, chemicals, refining. to play a recovery in oil, even a modest recovery, chevron will give that you extra beta, that extra leverage. >> good stuff, pavel. we want to get back to eamon javers in washington with more on that breaking news in washington. >> nbc news has obtained details of several announcements coming from the white house today on u.s. policy in syria. we're expecting more from the white house at 12:30 when josh earnest is expected to brief reporters on details. here's what we know now from richard engel. one policy change here is u.s. boots -- u.s. troops will begin to operate inside syria under this new policy. they will be there in small numbers, dozens, perhaps, less than 100 overall is the expected guidance we're getting.

they will be stationed in northern syria and work with groups that have a proven track record of fighting isis. a second announcement is increased u.s. air strikes. a number of aircraft in turkey. already some a-10 aircraft have arrived. f-15s. a third point here, establishment of an expeditionary task force to be based in irbil. this force size still to be determined it will offer flexibility and capacity to support forces against isis in syria and iraq including the kurds and iraqi army. all of this an effort by the u.s. and pentagon to step up its campaign against isis. clearly an implicit acknowledgment that the efforts so far to train and equip syrian rebel factions are not working. and the war against isis has reached a bit of a stalemate point. this is the u.s. effort to break that stall mate.

we'll see what the white house says at 12:30 in terms of more details on how this will play out. >> aren't the russians bombing? >> the russians are bombing. >> the russians will be bombing in this country where there may be u.s. troops on the ground? >> yes. we just had u.s. general breed love briefing reporters saying part of the concerns are that the russians are bombing some of the moderate syrian factions which the u.s. supports. so you have russian aircraft operating in syrian airspace, now you will have stepped up u.s. operations in syrian airspace. the tricky part is keeping all of that clear so we don't have accidental contact between the russian side and the united states side as they both try to support their efforts in this conflict. jim miklaszewski was just reporting from the pentagon that it's not exactly clear whether u.s. forces will be operating

alongside the syrian rebel groups or on their own inside syria it could be difficult to tell which group is which and who you're operating along side. it can be a dangerous situation for u.s. forces in syria. >> eamon javers, thank you very much. just watching oil prices. down about 0.3%. trading just below $46 a barrel. straight ahead, "new york times" columnist jim stewart diving in the complicated story of elizabeth holmes and baroness. much more on that when we come back.

romantic moments can happen spontaneously, so why pause to take a pill? and why stop what you're doing to find a bathroom? with cialis for daily use, you don't have to plan around either. it's 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. why pause the moment? ask your doctor about cialis for daily use.

for a free 30-tablet trial go to cialis.com

. good morning. here's your cnbc news update. as we've been reporting, nbc news confirming the obama administration is expected to announce shortly a decision to deploy a small number of u.s. speci special operations forces in an advisory role for syria. president obama says he will sign the two-year budget deal passed by congress overnight as soon as it reaches his desk. the senate voting 64-35 early friday to approve that deal intended to end years of gridlock. a court in poland ruling that the law therefo forbids th

extradition of roman polanski to the u.s. the u.s. could appeal that decision as the new law and the justice party government to be installed in november has indicated there will be no lee ye leniency for polanski. >> justin bieber canceled a concert short last night after performing one song. he said fans in the front row were not paying attention. so he took off his hat and jacket and left the stage. >> so temperamental. >> how hold is he? how he can be done? >> he's so done. none of the tweens i know, including the ones in my house, want anything do with him. >> all right. we're holding you to that. you're calling it here. >> calling the bottom for biee r

bieber. >> theranos under fire for questions regarding its testing technologies and ability to deliver fast, accurate and cheap results. our next guest says theranos and its $9 billion valuation has been aided by a strong narrative. joining us now is jim stewart taking up the big theranos scandal. this has to started with the fact that she was on magazine covers. she's been recognized by president obama. billionaire, college dropout. that's all part of it. >> it's astonishing the accolades and riches that crashed down on this young woman. by the way, i don't blame her for this. she certainly did her part to foster this narrative which i guess i should be wearing a black turtleneck today. if you want to become an entrepreneurial success these days, you need a uniform. but there's an important story

here that goes beyond theranos for every investor and people in the media and consumers that is when a story sounds too good to be true, maybe pause a bit. we don't know what outcome is going to be, we don't know what technology is. that's the point. we don't know. people were falling all over themselves to crown her the next steve jobs to throw hundreds of millions of dollars at this start-up company without knowing what was going on under the hood. >> just bring us up to speed for those of us not following it. it's a private company. >> right. >> what do they do? what did the "wall street journal" find? >> this company has a sensational idea and she sold it brilliantly. the whole point was instead of having a needle stuck in your vein and vials of blood taken, you go into a place, can a tiny bit of blood, they could get results cheap.

it sounded inno vaivativinnovat technology meets medicine. you throw in a woman who dropped out of stanford at 19, very attractive and articulate. it was off to the races. >> there was the great and the good lined up here with her. >> my question was -- again, putting aside whatever the technology is, because we don't know. how did so many people in the media, in corporate governance world, major leaders, how did they all buy this with such little scrutiny? when i started checking into it, it was like everybody was relying on somebody else, but nobody really did any work themselves. i spoke to the cleveland clinic, they said we have never seen the technology. we have not used it. we kind of like the idea. we didn't -- >> walgreens used it. >> that's the important you made, peer review was not part of this ro social security. >> i think an important point is the initial claims -- i read many of these which was to be able do these hundreds of tests

on a single drop of blood. as best i can tell through the verbiage that poured out from them, that's just not true. they are not doing hundreds of tests on a single pinprick of blood. in many cases, they're using a needle, they're taking the vial, using conventional equipment, if that's what they're doing, nobody will be excited. >> if you were her, trying to raise money to grow scale, would you have said no to these kcove stories? what were they do? >> i think somebody should have said are we getting a little ahead of ourselves and are we sure this is accurate? is this the best way to be introducing supposedly groundbreaking new medical technology to the world? it's better to get a peer review and take some time than get on the cover of "glamour" magazine and talk it up. >> there was some balance here. you were told she could be the

next steve jobs. she could be. >> she is checking those boxes. the iconic, dropping out of college, the outfit, the freakish diet. the save the world mission that you can sum up in one catchy phrase. >> one other important point from the column, unlike uber and airbnb which are constantly getting challenged by regulators, this is bumping up against the scientific method which is not the same thick ng regulati regulation. >> two different words. medical people don't care what she looks like. she don't care what the story is they say give us the data. this is our world. we want to see this. i spoke to a pathologist at the university at chicago, he said we have an army of people who would step up to test this for them, do this peer review, we don't need to know the mystery inside the box. i hope they take up this offer to do it.

but you're right. they don't care about the story. what's fascinating about theranos is that this is the first high profile example of silicon valley meets the scientific and medical community. it's not a pretty picture. >> can we get a final thought for you on where we are in this crazy year for the markets? the s&p up a percent and a half for the year. after a brutal summer and now a tremendous rally for october. >> the one thing i noticed recently in company results and the market following, you are seeing consumer spending kick in. we talked about that some time ago when gas prices plunged. then we didn't see it right away. there was a lot of debt reduction. i think we are seeing it last. that's the optimism i see now. the american consumer is in good shape, they're starting to spend. i'm optimistic -- >> can i counter that with the gdp data that had bad inventory positions? cos may be betting precisely against what you're talking about with their money in the

fourth quarter. it's not a done deal. discretionary is up 12% 14% this year. >> i know. i never put too much stock in the inventory build up. there are a lot of factors that go into that. consumer numbers were good. eventually the inventory will reflect conner demansumer deman. i feel good about that. that's why we've seen all of the strong tech numbers. people are looking, searching, buying. that's translate nothing good results. >> consumer discretionary and technology two leading sectors year to date in the s&p 500. up next, starbucks, one of the best performers in the s&p, up more than 50%. you will hear what co howard schultz told jim cramer when "squawk on the street" comes right back.

big day? ah, the usual. moved some new cars.

hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on. (laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern.

and ca"super food?" is that recommend sya real thing?cedar? 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. for my frequent heartburnmorning because you can't beat zero heartburn! ahhh the sweet taste of victory! prilosec otc. one pill each morning. 24 hours. zero heartburn.

♪ almost there. let's send it over to rick santelli for this morning's exchange. >> thank you, simon. it was chicago pmi today. alice, if we will to sum it up, we were talking off camera, mean reversion gives us all we need to know about chicago. let's go to the board. headline was up 7.5. the mean reversion aspect. explain. >> i think if you look at this report you look at these key indicators, the headline and orders in production, you think we had a good report.

a lot of this growth this month is just a reversal of the big down move we had last month. >> last month, headline, 5.7, 7.5. minus 7.2, up 9. you get the picture, viewers. >> overall the report was not as good as the headline looks. let's break it down. new orders definitely, a nice gain on that. up about two points from august. we did have planned and unplanned orders come through. we had a bit of an inventory build. >> it's all about inventory. gdp was all about inventory. let's go down to the bottom and look at order backlogs. >> we did have strong new orders, but the backlogs in contraction for the ninth month in a row. that means untilled order the in contraction. that's no good. it means there's not a lot to lead on. it could be leading to some of this volatility. we had a volatile last month. things calmed down, some new orders came in. on the production side, a couple of things. we're keeping pace with new

orders. building inventories. the other big thing here, we're undergoing a large period of r & d, and doing special projects. you do special projects and r & ds when you're not so busy because you have the bodies and the time. >> like companies joining forces and buying back stock. it's that same defensive posture. listen, we know that employment data will be coming up. tell us about the employment. >> the employment was down a little bit. i think that that reflected what was going on in september. we were a little bit weak. here's the thing, when you have these bodies, this is rotating around neutral. >> in the 50 area. yes. >> when you have this number of bodies, dproing production and special projects, the talk is once these special projects and r & d is done, some of these employment levels will go down because they'll let people go. >> holidays are coming up. i always like to see special sale.

there was a special question. you do the last 30 seconds on the special question. >> our special question was are your new orders going to be better in the fourth quarter than in the third quarter? about one-third said that they will be higher. about another third said that they will be the being a chicago cynic one-third says yes, and the other two-thirds are not all that optimistic. >> the answer has something for everyone, rick, but the bottom line is if it's the same or lower, that's not good because business has been kifr slow this year. >> chicago kind of broke away from all the regional reads. as alice framed it, it's more catching up with what we saw last month. simon hobbs, back to you. >> still quite windy, though. thank you very much. stars in starbucks hanging on to their now more than 50% gain soz far this year. c.o. howard schultz reports in line earnings, but disappointing holiday guidance in the cnbc exclusive jim cramer asked him specifically about china earlier on this show. take a listen.

>> you really have to play the long game, and we are sitting with almost 2,000 stores, opening a store a day in china, winning in terms of the equity of the brand. we're beginning to see the morning take form, and our success in china, although it's not a given, i think we have a great opportunity for build to build the business. >> bullish sentiment. we've seen it from apple, nike, and other big consumer names in china. up next both the royals and mets beat 30-1 odds to make it to the world series. that means big things for ticket prices and for betting in vegas. we'll go live to citi field here in new york when we come right back. at mfs investment management, we believe active management can protect capital long term. active management can tap global insights. active management can take calculated risks.

active management can seek to outperform. because active investment management isn't reactive. it's active. that's the power of active management. hi watson. annabelle, your birthday is tomorrow. i'm turning seven. at did you ask for? a princess. and a pony. you like things that begin with p. i like pink frosting too. will you have a cake? yeah. i was too sick to have one last year. the data your doctor shared shows you are healthy. are you a doctor? no. i help doctors identify cancer treatments. i want to be a doctor someday. i can help with that too. watson, i like you.

you wouldn't take medicine without checking the side effects. hey honey. huh. the good news is my hypertension is gone. so why would you invest without checking brokercheck? check your broker with brokercheck.

the mets are taking on the kansas city royals in game three of the series tonight at citi field in new york. eric is live in queens well ahead of what will be a mets victory this evening. eric, what's going on out there? >> how are you doing, david? not much going on right now, but obviously tonight will be a huge game. the metsz had a lot of catching up to do down 0-2, but just being here in the world series

for both teams, that's a huge accomplishment. if you look at the track records of both these teams, the beginning of the year, nobody expected them to be here. the payrolls of the teams are both below average. the kansas city royals valuation, only $700 million. they're the third lowest value team in the entire league. they're still paying off money as part of the settlement. ion though the teams don't have a lot of money to spend, the fans have a lot of money to spend. ticket prices for tonight's game are averaging $1,8 had been. it's $600 for the minimum cheapest ticket just to get in the door. this is the most expensive world series that they have ever tracked on the secondary market, and even the ceo of modell, the sporting goods store, said when they won the pennant last week they sold more mets merchandise in one day than they did all of 2014.

now, if you look at the odds both of the teams. now that the royals are up 2-0, they get a 76% chance of winning, but 30 years the mets came back from 2002 to beat the red sox. they might be able to do it again. simon. >> they have only won twice then. they have gone through it twice. >> 1969 and 1986. yeah, that's right. >> are you going tonight, david? >> no, not as of now, and not with those ticket prices i'm not going. maybe i'll just come out and join any the parking lot. >> that will be fun. >> let's do some tailgating. >> it's not a bad place, but simon would know that england is actually a place that baseball started, so i figure simon has a

bat, and he will be watching tonight. sfroo who would assume that simon knows anything? >> it's going to be -- we'll have the lepding club ceo. they reported results that beat expectations. finally, a former apple designer on the new apple tv. see what's coming in that box is and maybe you can unlock. all coming up on "squawk alley." . oh i got a job too, at zazzies. (friends gasp) the app where you put fruit hats on animals? i love that! guys, i'll be writing code that helps machines communicate. (interrupting) i just zazzied you. (phone vibrates) look at it! (friends giggle) i can do dogs, hamsters, guinea pigs... you name it. i'm going to transform the way the world works. (proudly) i programmed that hat. and i can do casaba melons. i'll be helping turbines power cities. i put a turbine on a cat.

(friends ooh and ahh) i can make hospitals run more efficiently... this isn't a competition!

good morning. it's 8:00 a.m. at linkedn. "squawk alley" is live. ♪