>> reed hastings -- >> i can't believe you're going -- blacking the nyt thing again. >> i was not plugging -- >> what did he say. >> he did say that content is king and -- >> let's bring this up tomorrow. we got to go. can't believe you. join us tomorrow. "squawk on the street" begins now. ♪ >> good wednesday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. the premarket inching high wer more record closing highs within reach. busy day with yellen on the hill, media earnings, more volkswagen fallout. china surges 4% on a weird day which we will get to. ten-year 2.22. trade gap shrinks.

in our road map, time warner, 21st century fox and cbs reporting a mixed set of results. >> tesla shares sharply higher despite a wider than expected loss. >> and groupon down almost 30% in the pre-market on a trio of negative news. first, stocks looking to maintain upward momentum a day after the nasdaq 100 closes at that record high. adp said the private sector added 182,000, trade deficit narrows in december to a seven-month low. fed chair yellen set to testify on capitol hill in the next hour. late yesterday at the deal book conference, andrew sorkin asked legendary investor stanley drunk drukenmiller for his view. >> does that mean you are anticipating chaos and you have all this cash under your mattress? >> no, i'm flexible. i'm playing around like

everybody else. and i'm watching and leery and ready to move. i can see myself get very bearish. i can't see myself getting bullish. >> talked a lot about the national debt, about the end game for qe. karmazin this morning asked to respond to that saying he's pulled his money out of stocks. >> well, i don't know. i went to delivering alpha two years ago, drukenmiller said fed funds rate should be 2%, after listening to him i felt he wanted to us pull all the money out of stocks which would not have been a good call. mel, i appreciate his insight into satellite radio and howard stern. mel doesn't impress me as someone i should follow. he used to tell me he follows me. i don't know. i find these gurus or whatever,

people who make the broad sweeping comments, the problem is that they can make broad sweeping comments tomorrow that are different. dave tepper, who i love and taught me, he was very, very bullish. but it was on carnegie mellon. >> he covered karcarnegie mello. >> he'ses s a huge bull on it, you're right. last time he was talking about the markets, he was not sanguine, either is mr. icahn. >> carl icahn at the bottom -- all i'm saying, is make up your own mind. since august 25th the industrials and oils have been nothing but net who would have thought that? they got oversold and underowned. ever since the attack on the drug stocks by hillary clinton, the healthcare stocks have been horrible. we are in a sector rotation, rotating bear. all these people are old style. talking about the market.

the market has stopped reacting since the etfs took over. parts of the market are in etf bear, parts in etf bull. i find the notion of pull all your money out of the market very 2005/'06, just not as valuable as it was at one time. >> you'll acknowledge the pain trade for hedge funds continues, even with all the good things you say about earnings season this quarter. >> yeah. i think the most important thing i heard about hedge funds was mr. hancock yesterday from aig saying hedge funds hurt him. hedge funds are trying to game what should be long what should be short. with the economy weak, they went into healthcare, that was a mistake. healthcare got attacked by the democrats with china falling apart, they went negative on the internationals. the shenzhen bottomed. i don't remember a single member

of the intellincia say they would bottom. i think we will find there were big prosecutions of shorts, very big prosecutions of people selling stock. >> taking guys to jail. >> star chambers. you can rig a market. glencore last night reported a good quarter. on august 25th, i thought they were going belly up. they had $2 billion that doesn't mean they were out of the woods. they are up 70% from the bottom. >> we were concerned about brazil. doesn't mean we still won't be concerned, but the real has been stronger. there's any number of things, and the chinese market. i wonder whether regulating a market and the way they do it in china is going to result down the road in something not particularly good. >> did you -- the central bank

released six-month old notes, it got the market up 3%. this article was from may, they post on their website, talking about a trading link between hong kong and shenzhen. market rallies 4%. but then once they acknowledge it's an old story, the stocks never looked back. >> you're not allowed to sell. once the market goes up, they nail it closed. i think the transparency of our fed versus their fed, can we acknowledge that our fed, as flawed as they are, does not issue 5-month-old, 6-month-old notes and juice the market. >> as far as we're aware, we don't do that. >> yellen, you can be critical of yellen, she will speak. the chinese central bank is a mystery. the fact that this note came out that boosted the market, once the market goes up you're not allowed to sell? that's telling. i mean you're not allow dodd insider selling. not allowed to do big block

trades, can't short. the government enforces it with white collar prosecutions that we would never have here. they are not slapping on the wrists, making shareholders pay. >> no, you go to jail. >> you do not pass go. you do not collect 200 yuan. it's a reference to monopoly. >> i'm familiar with the game. >> waterworks, after the mets loss. >> what in the world was that? >> that was a reach. >> thank you, carl. thank you. what are you doing? is it bad enough we lost three leads, two outs, five outs, three outs? i'm not talking to anymore. >> they knew terry collins for two years, replacing the current manager, matt harvey. did you see that one? >> yes. let's talk knicks and nets. okay. let's move on to media. >> i'm going hold to sell. cutting my price target and doing a community health system on the new york sports teams. >> we were just happy to be in

the world series. don't want to forget that. >> versus the phillies. >> ended in pain, but unexpected pleasure. >> speaking of pleasure or pain, many of the major media companies out with earnings. yesterday we got discovery. after the bell we got cbs. this morning time warner and fox reporting numbers. fox usually reports after the bell, but they are now changing it to the morning. let's start off with time warner. that stock looked okay. the call is at 10:30. looked to be better than expected third quarter results bus kept the 2015 outlook intact. that may be one reason why you're not seeing much of a move in the stock premarket. the call won't begin until 10:30 eastern where we may get more information from time warner. hbo strong. film studio was good, too, actually. >> yeah, warner, hbo revenue up

almost 5. jon stewart deal, four-year production deal. >> very interesting deal. if they did not have hbo now, there would not be an opportunity to get mr. stewart to do this deal. things should be as short as five minutes, they could be longer. they may have something on hbo has compiles what he has done. >> stock jumped. >> this is not an insignificant thing. i did see mr. plepler yesterday, but he wouldn't say how much they were paying him. anyone know? could be a lot. >> worth it if the stock jumped like that. time warner, the stock buyback was not as aggressive as -- >> as people anticipated. fox was not a good number. doesn't appear to be. the james murdoch era has been a

bumpy one that call started at 8:30. so we'll see what we get. film was weak. question is ad trends overall. but the cable networks at fox were quite strong. >> what the heck is the stock doing up? 3.4 verses 3.2? >> there's an underlying tone here, i want to get to cbs, there's an argument that ads are coming back in a big way. cbs had a good quarter. it really talked up its sequential increase in ads q3 to q4. it wasn't a particularly good time, but it does appear there were a lot of agency renewals going on. let me refer to a quote from the conference call last night talking about the ad market. in no uncertain terms saying positive things. if we do have that. i don't have it in front of me. the scatter market is remarkably strong.

it's the strongest we've seen in many, many years. to the point where our sales guys are beating down the door to remove promos. >> i was listening to that, didn't you want to buy an ad after that? >> football going extremely well, late night, prime time. every part of our company is doing well. clearly -- clearly, this is that reference to the agency reviews, had something do that. the sky wasn't falling. wasn't moving to digital. >> no. >> leslie can get very excited. >> he was talking about the thursday football schedule being better. that the matches are better. >> star trek. >> my god what did he call star trek? he was describing star trek as being an iconic -- >> it is. it attracted people to all access. 5.99 a month is what people are paying. you heard mel karmazin talk about that earlier. >> throughout the quarter i was doing this on the conference call, live long and prosper, buy the stock. i wanted to take out ads. how many times did he talk about

new programming. honestly, at the end i said i will be in a cbs sitcom. i want to be on jon stewart again that would be fabulous to reprise that performance. >> maybe you guys could do a short thing together. >> we could do that. spike the numbers again. >> spike hbo now. >> why not? my kids loved that. my wife loved it. get right back on there. live long and prosper. when we come back, janet yellen heads to capitol hill to testify on the fed's plans for bank regulation. we have four voting members of the fed speaking at some point today. fisher tonight. he has his work cut out for him. we'll hear what he has to say later on. look at the premarket this morning. facebook tonight, metlife, qualcomm, whole foods and more. the dow less than 400 points from an all-time closing high.

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tesla rising despite a wider than third quarter loss. the electric carmaker shipped more vehicles than expected and raised quarter numbers.

>> main thing with the x is just scaling up production. we're making progress with each passing week. actually, seven days a week every day i get an update on manufacturing progress and what the issues are. and we have seen no fundamental issues on the production. >> up 9% in the premarket. investors looking past the cash burn. jim? >> yeah. i was on the call. it is one of those calls where it's a very well orchestrated call. i remember what sergio marchioni said how musk really puts on a show. the analysts worried about the production ramp feel good about it. it remains a cult stock to me. if you feel like you can make a

couple thousand cars and you want to buy that stock, i can't stop you. the cars -- i was talking to my daughter about this. my daughter said the conclusion is you have to buy me a tesla when i graduate college. i said that's not going to happen. not going to happen. no. >> that's quite a reward for graduating college. >> yeah. >> just for finishing college. >> you don't love her? is that what you're saying? >> yeah. i think she'll get a volkswagen with a diesel engine. >> i like the line out of musk, in 20 years, owning a car will be like owning a horse. you may own one, but it will be for sentimental reasons. >> maybe. >> keep it out back, feed it hay. >> i don't know. this conference call was another thi thing, he could be on broadway, could run theme parks. >> do it all. >> he can do it all. the confidence level is so repugnant.

he's little like automobibelich got three rings, i'll do what i want. >> three. >> belichick with a human face. belichick with a huge face. that's who he is. >> with a human face. >> i'm trying to write these down. >> where is belichick? he will come out of his lair and get you. careful. >> there's two guys with hoodies, two winners, belichick and tonight we have to listen to mr. hoodie with the facebook. >> that's right. facebook is tonight. more pain for volkswagen today. shares plunging in european trading overnight as the carmaker says its emissions testing scandal was wider than previously disclosed. some gasoline cars had some worse than reported emissions. porsche issued a warning that the latest findings could further weigh on its results. maybe because it was translated

into the english, it's not clear if the 800 thoish,000 is in addo the 2 million, still a lot of questions. >> the one thing i would point out missed by a lot of people is the cars are still selling well. >> in germany they seem to be. selling well here. >> yesterday up 0.2. >> i would have thought people would say i'm not buying a car -- >> i would have thought the same. >> share being taken by gm. the sales are not dropping. that's rather amazing. the recall is gigantic. >> the recalls, the cost of the recalls, and then what they're liable to be facing criminally and/or civilly. you can just get to some huge numbers. >> systemically this company will stay in business. >> but this crisis is still expanding. it's not contained. >> german transport minister this morning saying he's irritated about how this has unfolded and that the brand is getting weighed on. >> i kept thinking it would be

down 20% 25%. toyota got hit hard. >> it was done that mucwn that . >> the car sales. >> i'm sorry. >> it does say how much people love the car. >> is not an understatement to say this is the most important story in germany this is being followed -- this is the company. a lot wrapped up in this company. >> can i say there's some crony capitalism in germany, too? volkswagen is the crown jewel. they won't let the crown jewels be too tarnished in the end. >> we have no idea what ultimate liability is here. >> no, it's totally open ended. the stock is not nearly as bad as i thought it would be. >> lebeau says sales have not bottomed largely because dealers raised incentives. 29%. who would buy -- look, i shouldn't say who would buy one. >> buy one at the right price. >> i have one. >> who doesn't want defeat

software? emissions defeat software. i like that with everything. we have a 2002 volkswagen bug. drives like a song. >> maybe you can get your daughter that instead of -- >> that's what she's driving. she wanted to trade up after that. not going to happen. we'll get cramer's mad dash and count down to the opening bell after the break. one more look at premarkets as the dow is at 2.2% from an all time closing high. 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.

all right. we have time for a mad dash. about six and a half minutes before the opening bell. belichi

belichick has four rings. he has more than musk. >> he got last year, shouldn't have happened, but it did. >> we all think he's a great american. >> great american. >> david? >> yes. >> it's still too early to buy groupon. >> okay. >> still too early. even here? >> yeah. >> can i touch this? >> yeah. >> all the way, still too early? >> you have go down here. camera, can you stay with me? down here is where we will suddenly -- this is where i'm calling the bottom in groupon. then even -- you know, look, might bounce here and come back. groupon -- i'm on the call. they refuse to acknowledge that anything is bad. they say they underinvested. this is the second company that said they underinvested. gopro underinvested. fitbit overinvested, people didn't like that either. the groupon quarter, it's fabulous they think they are doing so well. fantastic. come see me. i'll tell you how you are really doing. >> what are they doing? >> getting back to their roots.

they are? >> yeah. >> what happened to the old ceo? the guy who drank beer. >> mason? >> yeah. >> i don't know. funny guy. >> too early to buy zynga? >> no, still a little early on the zynga front. those are two -- when i say groupon, they're doing the merchandising, saying it's better than ever. customers like it. then they say, listen, but we haven't spent enough money and the opportunity is broad. that's why i say it's still too early. new ceo, hope springs eternal, mr. williams. we have him on -- we have him at 11? >> we do. >> i remember the fanfare when this became public. i believe they had an opportunity to sell out for a fairly decent number before they went public. they chose not to. >> goldman was in there. any way, it's too early, they have now underinvested. >> we'll see what new ceo has to say. he will be on "squawk alley.."

>> "squawk alley." >> "squawk alley." >> we have more with "squawk on the street." opening bell coming up.

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you're watching cnbc's "squawk on the street," live from the financial capital of the world. opening bell in about a minute's time. yellen on the hill today. she talks to the house financial services committee and the macro data has been relatively supportive. adp in line. the export data good. >> i know i'm not a guy who says what fed should do, shouldn't do, if they're going to make a move, you have a decent situation brewing in china. europe getting better. i don't think the fed should raise given the weakness in manufacturing. if it happened, it won't be the end of the world. >> interesting. >> i'm changing my posture. i was more concerned about foreign than now.

i like what's happening with the consumer in china. >> maybe that's one reason expectations are above 50 for december. every meeting is a live meeting. opening bell here. a look at the s&p. at the big board, new york taste. a culinary feast on november 10th of more than 40 top restaurants and bars. we see marcus samuelson up there in the red vest from red rooster. at the nasdaq, ss & c technology, a provider of software and software enabled services. >> marcus samuelson, fabulous. >> amazing. >> his book of his journey, sweden, south africa, amazing guy. good food. >> it is good. i have been there any number of times. >> amazing. >> pure joy. >> we have not gotten to michael kors. 1.01, beats by 12 cents. comps down, but half of that is

4x. >> you cut your numbers, you finally break even. that's what happened with kors. that's why people won't be too excited. this is the sixth worst stock of the year for the s&p, down 50% year to date. >> worse than green mountain? >> the journal, big story today saying women are basically saying i don't need another handbag. luxury handbags and accessories are trouble. >> what a great point. accessory business has been horrendous, ask fossil. the only guys selling anything are watches, fitbits. but vf corp, i didn't like that number. columbia sports buzz a good number. but accessories are bad. kors -- coach is another example. they lower, lower, lower, finally beat. this is not an area -- apparel has been bad. just bad. look at l.b., they have to reduce apparel and it's been

strong. >> green mountain is worse in answer to your question, year to date. allergan, i assume you will talk about that at some point. >> here's the thing about allergan. they can't talk about tevid. can't talk about pfizer. can't talk about the operations will look like, and there's a hearing on washington about drug pricing. all that says i think allergen is terrific but they're not able to tell the story they like. this is a moment brent has to be careful on what he can talk about. >> the main focus of allergan is if they can reach a deal with pfizer. there was talk last week that they would be moving with all due speed to try to get there. they are certainly trying to move quickly, but at the same time i'm not hearing an expectation that anyone will

have anything done before thanksgiving, which is still soon. >> not that far. >> not far away at all. then the question becomes how will it be structured. as we reported on the day it broke, it will be all stock. it will be structured to allow pfizer to invert. under/over, 11 shares of pfizer. >> how do you know this stuff? >> what do you mean? what do you think i do all day? while you're on television doing -- >> doing work. >> i can't make a phone call. >> you know more than brent. i will fill brent in on what deal will be. >> i think brent is on top of the situation. to brent's point, what are his aspirations? social issues could be an issue. does brent run the company eventually? does he come in in some secondary role with the opportunity do so, written in a contract that he will? always issues. >> how did brent become beyonce? same with saunders. how is brent like nell, brent,

les? how do you get to that category where you're a first name guy? >> good question. you're a last name guy. >> cramer. we all know who cramer is. a lot of stuff in food. mcdonald's launching a premium burger in the uk, calling it the sick sure collection. wendy's comps up. forecast is good. denny's comps up 6.1. they upped their forecast. >> it's funny how all over the map, pizza is not that good. we had numbers from papa john's that were not great. it's case by case in this business like i haven't seen in ages. i think mcdonald's, one thing that easterbrook does, if the signature burger does well, you will eat the signature burger. this guy moves fast. east not encumbered by the bureaucracy which seems like the navy.

fast mover. >> shack reports tomorrow. back to almost a 50. maybe a two or three-week high. people talking about beef deflation going into the -- >> the herd got big. the herd finally got big. chipotle stock going down. i don't know. the restaurant, you have to be careful. some restaurants did not do well. i was heartened by what wendy's said. wendy's okay, but people don't seem to react in the way i thought. look at bloomin' brands. did okay. and i thought it was a buy. suddenly it's -- that's the beef i was looking for, steer, herd. no. no one cares. so, i just would be careful restaurants, what they're trading on is healthcare and labor. who has worked out healthcare? that's minimum wage going up, very important. >> taking a look at media stocks which we mentioned at the start

of the broadcast, given earnings from cbs, fox, time warner in the last 12, 18 hours. cbs up the most. 4.5% on what were strong numbers and very positive commentary as we highlighted on the conference call, particularly about the advertising market. but it's not widely shared. fox is down about 1.6% again, those numbers did not appear to be particularly good. that conference call has ended. i'm going through some of the notes that our producer katie put together. the buyback there perhaps better than people thought. >> on cbs? >> fox. >> yes. >> time warner also down over 2%. the idea being the outlook there was not improved. remember, of course, originally the targets of 6 bucks, 16, 8 dolla dollars a share and 18. i don't think anybody will think they will get those. that's when they were in the

fight to keep the company from the clutches of fox. fox is a bit smaller than time warner. >> let's go back to that advertising. people seem to be fired up about what les has talked about. he also talked about bundle. he had a lot of options that made it sense like stop worry being that. focus on advertising. >> when it comes to the worrying of skinny bundles, cord cutting, his answer is we'll be there. we'll be there with all access. people want the nfl. they want cbs programming. i have yet to meet a ceo of any of these companies who says they won't be a part of the slim bundle. they will all be a part of the slim bundle. >> the fat slim bundle. >> weight watchers bundle. i love the cbs call from one point of view. content. in the end, they got these things that people watch.

this "big bang" things worth billions of dollars. cbs knows how to develop. it's important to point that out. disney knows how to develop them, too. >> speaking of content. >> yeah. i am just kind of astonished how important content is to cbs, how smart they are at development of the product. they seem to have an algorithm. not unlike when reed hastings told me they had developed "narcos" as a combination between breaking bad and scar face. these guys know what we want. in the same way you know how the allergan deal will play out. >> i don't know. >> it comes the day before thanksgiving or after? is that friday? >> pretty good. >> that you know that. >> i don't know that. i'm sharing some thoughts out there. if i know it, i will report it as fact. i promise. you'll know what i know. >> other guys will report what

you said, report it as their own. >> still early. >> still early for the eagles, too. >> sure is. >> so, with all of that, s&p is back to 2112. let's get to bob pisani on the floor. >> kind of flat, but you have been highlighting the right points, we're very close to historic highs on a lot of indices, not just the dow. let's put up how close we were. this was prior to the open. the dow 2.3% from historic high. the s&p is even closer, 2130, we are at 2111 right now. small caps have lagged, the furthest away are the transports, 11.8% from 52-week highs. getting close there. in china, you talked about the speculation about the hong kong shenzhen link, which later proved to be an old story. it moved up. the bottom line on this is that the hong kong shanghai link was

successful and hong kong's shenzhen is coming. if it doesn't come this quarter, almost everybody believes it will be in the first quarter of 2016. this is coming. we'll have more about what all of that means in the coming weeks. look at europe. couple interesting things. glencore up. it's bringing all the minors up with it. glencore said they are cutting debt faster than expected. their trading arm will meet earnings expectations. modest moves up. glencore had a terrible year. the autos in europe, not having a good day. this emissions scandal widening a bit. volkswagen down, bmw and daimler also down to the down side. some of the biggal oil companies are checking in with mixed result. chesapeake had a loss, due largely to big write-down in oil and gas properties. they had riwritedowns, brow duc

shun is up 3% and they cut the capital expenditure 35% quarter over quarter. that's a remarkable move. they are getting production with big cap x expenditure cuts. same thing at devon. look at devon here. they had good numbers overall. and they beat better than expected. they had lower cap x for 2016 but still production growth. they're doing a lot more with less. they're learning how do it. that's a very, very good sign overall for the companies. learning how do more with less. let's talk about kors. you mentioned kors. i'll tell you what is good, they beat on the top and bottom line. guidance was cut but not cut as much as people expected. the good news is that the concern that the handbag business is in a complete freefall did not happen in this report. and the guidance was not cut as

much as expected. i'm not trying to guild the lily. you know, you guys are right, it's down 40% on the year. so, it is certainly a disastrous year this could have been worse and it wasn't. good news. remember all that volatility in august? remember when the vix went to 50 on china fears and we all blew up? you know who did well on that? virtu. reported excellent numbers. much better than anticipated. they noted that the u.s. trading division, a big marketmaker, high frequency trader, did much better than expected. when the vix blows up, people who are active traders, volatility helps out those kinds of active traders. that was born out in a good virtu report. a winner in the ipo business, they went public at 19 on april 15th, trading at 25 right now we'll talk about the ipo winners on the year as we get closer. that's one of them. carl, back to you. >> thank you very much, bob

pi pisani. let's get to the bond pits. good morning, rick. >> if there's more crumbs running around trading, you can grab them, but not a lot of crumbs in the treasury complex. decent trading, but not a lot of movement. what movement there is is stacking and building. flirting with close to 2.25 closes, but everyone wants to look at two-year. i get it. inching ever closer to 80 basis points which seems to be a magic threshold. a lot of the activity associated with the federal reserve and what they may or may not do. all the talkers out there yapping about what may or may not occur. look at a chart going all the way back five years of two-year. been there, done that. the last meeting, september 16th. we had the 15th and 16th to close above 80 in the two-year. last time that happened was early 2011.

tens minus twos, where shoe see a dramatic flattening, if this is all about what fed is going to do, don't see it. very well behaved. another spread, one that i find fascinating, tens minus bunds. 150 used to be home base. that staircase on the right is no longer the home base. slowly escalating, which, in my opinion means, you will see ten years doing what they're doing, moving potentially higher. my how the tables have turned on bund yellields. on the dollar index chart, 98 is what is expected to trade. when it closes above there, will there be follow-through? carl, back to you. >> rick, thanks for that. when we come back, a rough morning for groupon. a number of challenges facing the company's new ceo. stay tuned for an exclusive interview. and the fed's regulatory

activities under the microscope. janet yellen preparing to testify before the house financial services committee. back in a minute.

two days to go until the big jobs number, tweet your predictions. in honor of our sister show's 20th anniversary, the lucky winner will receive a "squawk box" 20 vest, signed by the entire "squawk on the street" gang, which jim will sign right now. >> i have one of these. they are fabulous. i gave it to the wife. she loves it. >> i wore it the other night. >> did you? >> where did you go? >> i was at citi field. >> awkward, again. you'll have until one minute before the jobs report on friday to tweet your predictions.

estimate i think is 183. >> fed will be on hold there. more nonsense. talk about them being on hold or not. i did change my view. >> i know. >> i'm no longer saying it's the end of the world. this is what facebook does. >> how do they do? it's all over the map. 50% of the time it goes up. 50% of the time it goes down. both the day after and the week after. inconclusive, but the stock -- you can't gain the earns is what i was going to say in my stop trading segment. >> whole foods, i guess i could make a case. >> whole foods will be on my show tonight. the press is so bad i don't know whether they could make it worse. whole foods, what they make per square foot? so big. i don't know why they tolerate all this negativity. >> i think the time's piece went a long way saying we will not cut prices. they raced to the bottom.

>> 3.65, their product is extraordinary. i know treehouse makes a lot of it. the margins are big. if you want to know why i still -- not why i shop at whole foods, the one in brooklyn is beautiful. i do it on saturday. what should we do today? let's go sit at the goo withigo. >> the gowanaus comes up a lot in our show. >> wife from flushing. >> not a bad place. >> when we come back -- >> she has never seen the show. >> we will get stop trading with jim in a moment.

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customers feel like friends, neighbors and it makes it a little bit more special. together, we're building a better california. time for cramer and stop trading. >> you know, we're always looking for the benchmark of bad. i told you groupon wasn't that good. the pre-announcement last night for designer shoe warehouse,

dsw, new ceo took my breath away. you shou so shoes are in a bea, handbags in a bear market. keep that in mind. >> i will. i will. >> noteworthy. >> not in the market for either one. thank you. >> just keep it in mind. >> okay. >> regeneron reported a great number. people will focus on the cholesterol lowering drug. but regeneron part of this -- you have to watch washington when it comes to drug pricing. a lot of people down there are still upset about drug pricing. a hearing going on today. >> that debate has not ended. >> not done. you always have to thread the needle when you get excited about a drug company, you have to look at what washington says. they want prices lower. the only way to get lower is to have medicare bargain. that's not the american way.

>> you said you have allergan tonight and whole foods? >> yes. and -- royal caribbean as well. the thing i would tell you, whole foods. i've been waiting for the last bad quarter. this might be. and if they can come up with a strategy to be able to make it so the private label has more share and they're immensely wealthy. they need to roll up the whole industry. this is my view. walter robb is a straight shooting guy. >> i always respect the fact he comes on with you rain or shine. >> what does that say about the character of that man? about as high as get in our industry. >> all right. >> that's what i have to say. >> is that it? >> no, allergan, i'm trying to nail you down. right before thanksgiving, the deal with pfizer? >> we'll see. >> monday after? >> i'll let you know. >> who is playing thanksgiving day? will that impact you? >> detroit lions. i'm certain of that one. >> your reporting is the best i know.

i'm just telling you. >> i'm not -- to be clear, i'm not -- >> i'm reading about how botox sales are, and the problem with brazil because of real. you have this story. >> still in negotiation underway in terms of allergan and pfizer. >> i'll let brent know where we are. brent, beyonce, frank -- the new book, frank. these are people who are first-name guys. dean, frank. >> sammy. >> sammy. john? johnny? >> johnny who? carson? >> no, stewart. >> oh. >> jim, we'll see you tonight. "mad money" at 6:00 p.m. when we come back, fed chair yellen testifying before a house panel on capitol hill what will lawmaker asks her about bank regulation, the economy and rates? euro had a three-month low. >> oh, man.

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welcome back to "squawk on the street," i'm carl quintanilla, sara eisen, simon hobbs, and david faber.

you are looking at a live shot of capitol hill where fed chair janet yellen will testify before the house financial services committee in just a few moments. the topic is bank regulation, but she's one of four voting members today. we have fisher later tonight. dudley around 2:30. as soon as yellen begins to speak, we'll take it live. dow has faded a bit. down about 18. we do want to get directly to, i believe, steve liesman who has breaking news. >> carl, thanks very much. janet yellen testifying before the house financial services committee. her statement just hitting the wires now. here's what she says. she says the banks in the united states are much healthier but that problems remain. financial conditions of the biggest banks, she says -- biggest bank organizations have strengthened considerably. goes on to point out the eight biggest u.s. banks have nearly doubled capital level to $500 billion. she points out large and ren

regional banks are well capitalized. on the problems, substantial compliance and risk management issues and those compliance issues have undermined confidence in the biggest banks. on regulation she will give an overview or survey of how the fed has changed in the wake of dodd frank. the fed has shifted from regulating individual banks, to doing that and overseeing the financial system. she points out regulatory reforms are designed to reduce the chance of big bank failures and limit systemic risk from the failure of an individual bank. she also goes on to talk, by the way, about community banks. she says community banks are significantly healthier, and loan growth is picking up. that's the only economic statement at all in the testimony. she says problem loans have been reduced. on a big issue she will be talking about, the fed is trying to ease regulatory burden at

community banks. there is no comment on monetary policy, but we can't rule out that the fed chairman won't be asked about that in the q & a session as well as a probe of a leak of the federal. >> as far as bank regulations, are you listening for anything specific in terms of what she might endorse? we were chatting in the summer time where she talked about new legislation that could lift the threshold on dodd frank regulation from $50 billion. that would be a big deal. >> that would be a big deal, but a lot is up to congress. the fed says it feels like it has done what congressman dated in dodd-frank. if congress wants to change that, that's entirely up to congress. >> we'll see what she takes in terms of q & a on that, on the leak, monetary policy, this days after show indicated the fed is looking to raise rates in december. breaking news on ism

nonmanufacturing just crossing the wire. looks like a good new. let's go to rick santelli. rick? >> is a good number. october read, 59.1. second best read of the year. the first was july at a little over 60, among the highest ever with regard to this series. let's go through some internals. considering we had adp today and friday jobs, 59.2 versus 58.3. on the employment index, on new orders, 52.0. looking at these numbers, it's surprising that growth has been so mediocre. we all heard of regulatory purge, maybe there's a survey purge going on. it's hard to reconcile the strength of these numbers with some output on the service side of the economy. simon hobbs, back to you.

>> thank you very much, rick. the dow is now down 11 points as we await janet yellen's testimony. behind those headline figures, the adp figures which were strong today. the dollar figure is much stronger. art cashin joins us on set. art, good morning to you. >> good morning. >> this is the financial regulation panel. we know that. they're within their rights to ask questions about the economy. this is the first time she's been in public since last wednesday when they put the possibility of a rate hike in december firmly on the table. explicitly on the table. the view out there seems to be if she wants to cement that, to change the problemibiliability they'll do something in december, now is the opportunity. >> today is an ideal day, you have yellen speaking, then dudley, then, of course, fisher after the close. it is assumed that fisher will

adhere to the line that december is a possibility. dudley possibly will. he may be the wild card. it's interesting to see if congress decides to ask her would you like to comment on monetary policy. is it your view if they talk about december it's simple verbal intervention and it won't happen and the market is safe in its assumption that we won't get a rate rise until next year. >> it's my assumption that they won't be able to pull off a rate rise. that having been said, the yield on the two-year is up to the highest point it's been this year. it's returned to that point because they clearly assume that at least fisher will talk about a hike in december. >> the market is sort of deciding itself. not just the two-year, the 30 year, the dollar is charging forward against all other currencies. the message is raising the probability as long as economic data comes out strong, services,

adp, december firmly on the table. >> you have three people speaking today with a high likelihood that one will reinforce it. if you're a short-term trader, you want to protect yourself from that. you pay up because you assume they will move further. some of the dip in the euro depends on what draghi had to say yesterday. though he wasn't specific about expanding qe, he talked about how give cult it was to get inflation to behave the way they wanted. he was dovish. that sent euro down. s if he's expanding qe, it will be an uphill fight to let them go. what we're benefiting from here, some very strong seasonals s november begins the best two months of the year, the best six months of the year, and the first week of november is historically the strongest week of the fourth quarter you have

all that working for you. >> how are the two tide, the ecb and the fed in december? draghi talked about additional things in december. we have a meeting in december. does one have go before the other? are they completely unrelated. >> i can't believe in today's environment that things are unrelated. that's why you saw the fed back off in september when things in china turned choppy. they're afraid if they tip over one domino t may move around the globe. they'll be very, very careful. that having been said, i think fisher will nevertheless try to tee up december. >> not -- it's been a short-term history of the euro, but we have not seen this divergence so stark where the ecb would ease and the fed would tighten at the same time. >> but the ecb meets before the fed. the fed is on the 16th. the ecb the week before if draghi goes ahead with qe, he

pressures yields around world which gives them space to act. they have less likelihood of a temper tantrum. >> but it will make the potential move in the dollar far more dramatic. that's another thing to worry about. >> to come back on this idea that the seasonals are quite good this time of year. the bigger picture is surely this very, very strong rally. coming up until basically last week when we stalled, really as result of what the fed was saying. it could be they cap our gains to the rest of the year with this type of conversation. >> it's that, and you're bumping up against some real resistance here. you've been here before. today 2116 to 2119 in the s&p. as much as we'll be watching what yellen has to say, watch at 10:30 when the crude inventories come out. we rode the crude higher yesterday. the crude is weak today. if crude moves up again, you

ride it higher. if it sells off, the dow sells off. >> art cashen from ubs. we are moments away from fed chairman janet yellen's testimony before the house financial services committee. for more on what we can expect to hear today, let's bring in doug gregg, professor of dartmouth and also former governor of new hampshire. good to see you again. >> hello. i'm >> you are qualified to talk about what we're seeing today which is the fed chairman taking questions, testifying on this issue of banking relations. a lot of people forget that the fed is a big bank regulator. how effective has the fed been with the new powers bestowed upon it with dodd-frank regulating the financial sector?

and how is her relationship with the banks? >> i think it's total confusion. you now have a whole series of different regulators moving forward as a result of dodd frank. the final regulations have not been done under dodd-frank. you have genuine confusion. it caused a contraction and liquidity in the market. main street is finding it harder to get money-do ---to have mone lent, they are going to shadow banking and other resources because there's a disfunction within the regulatory driven primarily by the dodd-frank bill. >> she is talking about, according to prepared testimony, easing the regulation on community banks. it's not really the fed's fault s it. >> it's definitely not the fed's

fault. it's congress' fault for passing this bill. was going say, we have the s.e.c., all these bank regulatory bodies. it's hard to distinguish what the fed's role is. >> they used to be the primary regulator. they were the folks everybody knew they could go to. they were the professionals, extremely nonpartisan and professional. now you have four, five major regulators in the mix as a result of dodd-frank. you have this group of over -- this oversight group. sorting it out has been difficult for the financial community. and the community banks are taking a hit. it's expensive for them to conform to the new regulations. even at the middle sized regional banks, they're getting pressure under this. the large banks have come under severe scrutiny. it has not solved most of the problems which were created and caused dodd-frank to come down the route which is excessive and

inappropriate underwriting of real estate loans. >> can i change the subject and ask you about the relationship between the fed chair and gop? the last time she testified before this committee it was testy to say the least. five months ago. since then there's been a lot of diplomatic activity between the fed and the rest of the committee to reduce tensions and last week they released 4,000 documents or pain pages of doc relating to the inquiry of that leak three years ago. what does it do to have donald trump suggesting this lady is keeping rates down at explicit request of the president? where does that put relationships generally with the fed? would you support that accusation from donald trump? >> no, i think that's a ridiculous accusation. chairman yellen is and traditionally has been someone who has been what you would call a dovish person on monetary policy side. and she's very concerned, i

suspect -- >> forgive me, sir. janet yellen is beginning to speak. we did promise viewers we would take them to her live. >> i appreciate the opportunity to testify on the federal reserve's regulation and supervision of financial institutions. one of our most fundamental goals is to promote a financial system that is strong, resilient, able to selfrve a healthy and growing economy. we work to ensure the safety and soundness of the firms we supervise and to ensure they comply with the applicable consumer protection laws so that they may, even when faced with stressful financial conditions, continue serving customers, businesses and communities. this morning i'd like to discuss how we have transformed our regulatory and supervisory approach in the wake of the

financial crisis. before the crisis, our primary goal was to ensure the safety and soundness of individual financial institutions. a key shortcoming of that approach was that we did not focus sufficiently on shared vulnerabilities across firms, where the systemic consequences of the distress or failure of the largest, most complex firms. in the fall of 2008, the failure or near failure of several of these firms, many of which we did not supervise at the time, sparked a panic that engulfed the financial system and much of the economy. today we aim to regulate and supervise financial firms in a manner that promotes the stability of the financial system as a whole. this has led to a comprehensive change in our oversight of large financial institutions.

as my written testimony describes in more detail, we have introduced a series of requirements to the largest and most complex banking organizations that reduce the risk to the system and our economy that could result from their failure or distress. in addition, we supervise financial institutions on a more coordinated, forward looking basis. at the same time we have been careful to make more measured changes in our approach to regulating and supervising firms at the other end of the spectrum. we are committed to ensuring that the supervision of smaller institutions is tailored to the business model and activities of individual institutions. in supervising community banks, we are refining our list focus approach which aims to target examination resource at higher

risk areas of each bank's operations and to ensure banks maintain risk management capabilities appropriate to their size and complexity. given the important roles that community banks play in their communities and the economic support they provide across the country, we recognize that supervision of community banks must be balanced and measured. the regulatory reforms we adopted since the crisis address the risks posed by large financial institutions in two ways. first, reforms reduce the possibility that large financial institution also fail by requiring those institutions to make themselves more resilient to stress. however, we recognize we cannot eliminate the possibility of a large institution's failure. therefore a second aim of our

post-crisis reforms has been to limit the systemic damage that would result if a large financial institution were to fail. again, my written testimony provides more detail, but i wish to highlight for you two examples of how we're addressing this too big to fail challenge. first, limit the systemic effect of a large institution's failure the board and the federal deposit insurance corporation have adopted a resolution plan rule that requires large banking organizations to show how they could be resolved in an orderly manner under the bankruptcy code. second, the board just last week proposed a rule putting long-term debts and total loss requirements at the largest banks in the united states. with the new requirements, if losses were to wipe out a firm's

capital and push a firm into resolution, a sufficient amount of long-term unsecured debt would provide a mechanism for absorbing losses and recapitalizing the firm without generating contagion across the financial system and damaging the economy. in addition to strengthening the regulation of the largest, most complex financial institutions, we have also transformed our supervision of these firms. our work is now more forward looking and multi disciplinary. dr drawing on a wide range of staff expertise. we put this new approach into operation with the creation of the large institution super vision coordinating committee which is charged with the super vision of the firms that pose elevated risk to u.s. financial stability. the program compliments

traditional firm specific supervisory work with annual horizontal programs that examine the same firms at the same time on the same set of issues in order to promote better monitoring of trends and consistency of assessments across firms. for example, our comprehensive capital analysis and review or cecar ensures large financial holding companies have rigorous, forward looking planning processes and have sufficient levels of capital to operate through times of stress. i would note that capital at the eight largest u.s. banks alone has increased to almost $500 billion. a new regulatory and supervisory approach is aimed at helping insure these firms remain strong. while more work remains to be done, i hope you will take away

from my testimony just how much has changed. our supervisory approach is more comprehensive, and forward looking, while also tailored to fit the level of oversight to the scope of the institution and the risks it poses. the federal reserve is committed to remaining vigilant as a regulator and supervisor of the financial institutions that serve our economy. thank you. i would be pleased to respond to your questions. >> the chair now yields itself five minutes for questions. chair yellen, the first couple of questions i have deals with the concern, has the fed crossed the line from being regulator to manager? we had a number of individuals come to our committee to tell us that fed officials have regularly attended corporate board meetings, t under the fed

purview. is that true? >> i'm not sure if that's true. it is not -- >> you are unaware of any fed officials attending board meetings? >> it's conceivable that that might have occurred. i -- i'm not saying that it did not occur. i don't -- >> if it did occur, what legal authority would you cite for having employees of the fed invite themselves into corporate boardrooms? >> i don't know what the circumstances are in question. i can, for example, tell you that when i was president of the san francisco fed, that i occasionally would attend a portion of a board meeting of one of the firms that we supervised to make a presentation to the board about our supervisory findings and the

emphases -- >> but you're unaware of any fed officials attending these board meetings? you have no personal knowledge of this? this is not a policy of the fed. >> i really don't have details about -- >> we would appreciate it if you could look into this, chair yellen, and get back to the committee on this matter. we also heard from individuals, with respect to the stress test, which we have had both public dialogue and private conversation, many of us on this committee considers that to be a rather opaque process. so this committee has a number of questions. we also asked members of the employees of the financial institutions who are been on the receiving end of these stress tests, we have been informed by numerous individuals that they have been told by the fed not to speak to members of congress

about the stress test. do you have any knowledge of this matter? >> i have no knowledge of that. >> okay. is it the policy of the federal reserve to instruct members of banks subject to the stress test not to speak to members of congress? >> i strongly doubt that's our policy. >> you're unaware of that being a policy. would you object to these people speaking to members of congress? can you let it be known to your employees that they should not be telling private citizens not speak to members of congress about stress test? >> private citizens can interact with members of congress. >> you're willing to direct your employees to ensure that that dialogue can take place? >> i will certainly look into tha that. >> with respect to the stress test, again, great concern about how opaque and nontransparent these affairs are -- the first

question i have is, we don't doubt that you have -- that you have many serious employees, very smart, regulatory staff who handle these matters. but we still don't know much about this. how is the market -- how are market participants supposed to be convinced that we have less systemic risk when they have no insight into these tests since members of congress have little to no insight into these tests? how are we supposed to reaffirm market confidence? >> we do a great deal, in my opinio opinion, to explain the methodologies that we employ. we published overview of the methodologies that we use, we update those every year. they include detailed information about the scenarios, the analytic framework we use, and information on the models

that we -- >> i guess, chair yellen, detail may be in the eye of the beholdibehol beholder, because members of congress still don't understand this, and members of the banking industry don't understand either. one last question, with respect to these tests, have the stress tests become your main tool, your main supervisory tool for the large banks, but my concern is if you have one centralized view of risk and you're imposing that view on our large banking organizations, to some extent ni isn't that what bazell 2 did in telling banks they had virtually no to little capital, how can that lower systemic risk if we only have one centralized view of risk and it may be wrong. >> i guess i would dispute the

idea that we have one centralized view of risk. the purpose of this exercise is to help the firms develop their own analytic capability to model the impact of various stresses on their organizations. and to develop a robust capital planning process which is what we evaluate in our cecar exercise. >> i wish we could conclude the same thing, but we have insufficient information about your stress test to come to the same conclusion that you make. i'm over my time. the chair now recognizes the ranking member for five minutes. >> thank you very much. i'm pleased to see you, chair yellen. unlike the chairman, along with many of my colleagues we heard from regional banks about the comprehensive capital analysis and review, or cecar stress test. they have complained that they're not sufficiently

calibrated to the unique profile of large banks. we also heard that the annual filing of living wills is cumbersome for banks and for the supervisory process. i have no indication that they've been told not to talk to us. they talk to us plenty. we're listening. at the same time congress is considering legislation that would do severe damage to the new standards that the fed has implemented and their ability to identify and respond to risk in the future. so, can you discuss why hr-1309 a bill debated by this committee yesterday, which addresses this topic, would be severely damaging to the fed's ability to respond to systemic risk on an agile and comprehensive basis? secondly, will the federal reserve commit to doing further tailoring using the existing

authority provided by 165 of the dodd-frank act on the two issues i cited earlier, the cecar stress test and living wills? >> your microphone, please, chair. >> pardon. sorry. i am concerned very much about a process that would require, as i understand 1309, would require the board to use a statutelysta -- to address a firm's risk. we do do a great deal of tailoring of our supervisory

approach to make sure that it is appropriate to the size complexity and systemic risks posed by a particular firm. we're committed to doing that. and we are looking at further ways in which we can taylor our supervisory approach, in particular the cecar process that we were discussing. we have some ideas about how we might tailor it, particularly to apply to smaller firms. we have indicated that we -- there are some constraints on our ability to tailor our supervisory approach for the smaller firms subject to the 156 requirement. in particular, dodd-frank requires that we administer stress test and receive

resolution plans. our experience thus far is that the safety and soundness value of those requirements for the small -- the smaller of those firms probably is not sufficient to justify the cost imposed on them. so we would value for the firms on the smaller end of the spectrum being able to relieve them of those requirements. but i do want to make clear that we do taylor our supervisory approach according to the complexity of the firm and they're committed to doing that. >> i'm so pleased to hear that because what we heard constantly yesterday was that you do not. that somehow they kept talking about one size fits all. and that you're not using your tailoring authority. thank you for explaining that to

us. we are absolutely supportive of your being able to do that. we think it makes good sense. perhaps what we need to do is work with your staff a little bit more to understand whatever restraints there are involved in tailoring, and whatever authority that you have and flexibility that you have. but thank you for clearing that up. that's very important. you know you have the authority. you understand that dodd-frank gives it to you. you use it. you're welcome. any questions from this committee about how you use it and how you can't use it. thank you very much. i yield back the balance of my time. >> the chair recognizes the gentleman from texas, chairman of the financial institution submsu subcommittee for five minutes. >> janet yellen answering questions. she was taking questions from the ranking member, that would

be congresswoman maxine waters, and the chairman before that. questions about the stress test which the federal reserve does administer, mostly focused on banking. nothing about the economy yet, steve. a lot of talk about the stress tests, the opacity, the fed process, what it tells banks they can talk about. >> we are hearing two things reflecting republican frustrations with the federal reserve. this notion that they're not transparent. the chairman putting out a statement and reading from that statement that the fed is not transparent enough. it also reflects a complaint from the banks that the cecar stress test is not transparent enough. that banks don't know what's coming. so it's hard for them to adhere to or pass the test. the other side -- from the other side of the aisle, maxine waters, reflecting a concern of republicans and democrats that community banks are overburdened with some of these complicated

and onerous laws from dodd-frank. there's been a back and forth between congress and the community banks and the fed over how they can reduce this regulatory burden, capital requirements, stuff like that. the fed has made some changes. unclear whether it's made enough to sats fight industry or politicians. >> i find the thing -- i find it a little painful to watch. janet yellen herself is pinch-hitting this is not her position. the white house has yet to nominate this position. this is the first of its kind testimony on the house financial services committee about banking regulations, something required of the federal reserve under dodd-frank. it will be political as it always is. >> you're right. well to point that out. there is a position mandated by dodd-frank, the vice chair for banking supervision that is supposed to be appointed by the president, approved by the senate that position has not been appointed and congress has not approved that position. so yellen is standing in for

that person. there's a person at the fed, dan turulo who really serves in that position or is the overseer of most of the banking regulation for the fed, but yellen has chosen to take this job or do this congressional mandated testimony in part because it's such an important new role for the fed. >> steve, it is kind of legend in this country the degree to which the banks and financial services industry would lobby members of congress in order to get things changed in their direction and obviously the subject of the gop primary debate, as we see. are we seeing the rubber hit the road here? is this where the lobbying from the final services industry to an extent is put up against janet yellen as the regulator? is that the undercurrent of what we're witnessing? >> that's an excellent observation. the banks have been lobbying, but remember the context. in the post-financial crisis world, the banks don't quite have the power that they had previously.

politicians have to tread carefully in terms of arguing for less regulation. it's an idea that doesn't sit well with the american public in a way it might have before the financial crisis or the public might have been more neutral about it there's lobbying going on. we had stan fisher, the vice chair, talking about a backlash from the industry against regulation. this is how it comes through, two politicians from both sides of the aisle. not fair at all to pin it all on the republicans, though they are the greater recipient of that money from the financial industry but democrats do it as we both sides of the aisle. i will say there was a paper that was put out at the american economic association annual conference that showed that bank lobbying does help. that the more money a bank gives to lobbying, it does get regulatory relief from those lobbying dollars. >> and in no means do we wish to denigrate the idea that the -- that there may be problems with the banking system and it needs to be unclogged. steve, let's let you get back to

monitoring the house and bring in rick santelli. wick wh rick what do you make of what you've seen? >> once you bail out banks, once you throw into the garbage heap the only regulation that works, the ability to fail, we go down the rabbit hole. janet yellen is talking about transmission lines. i don't think the fed has any idea about transmission lines. if they dshid, all the issues post-crisis would be transmitting growth. you have the fed, dodd-frank, all this regulation, complicated, unfinished here, and trying to deal with it are the banks. steve say they're not more powerful. where i come from, more money is power. janet said they're significantly larger in the balance sheet than before the crisis. you have banks trying to give credit. people who want credit in the middle. you have all of this garbage. the wealthy have access to credit. but the wealthy in and of themselves are not the backbone

of the u.s. economy. the evidence that none of this is working is that there's so many people out there, as janet yellen or somebody in that testimony pointed to, trying to come up with all these creative ways to get credit. systemic risk, transmission lines, they don't understand. the modeling for markets is not working. by the way, one of the main reasons, many say that ill logic of rates moving higher when treasury is the best collateral, air quotes for those on radio, it's the capital charges. all of these rules are making capital more expensive for u.s. banks. somebody brought up bazell 2, what that is doing is pushing up rates. you think that's going to help some get credit? when we talk about pushing rates up from zero, all of a sudden everybody understands. it's not that easy. rates moving up might have near-term effects, but the long-term effects could be more positive. >> rick? i think we want to take our

audience back to capitol hill. janet yellen is getting a question on monetary policy. >> my question is, do you think the risk of raising rates in december which will very likely be before relation -- before inflation reaches the fed's 2% target, outweighs the benefits? >> thank you for that question. so, let me say that at this point i see the u.s. economy as performing well. domestic spend hag been growing at a solid pace. our trade performance, net exports is soft. but the committee judged in october that some of the downside risks to diminish relating to global economic and financial developments. i see underutilization of labor

resources having diminished significantly since the beginning of the year, though recently we have seen slowdown in the pace of job gains recently. so, with that sort of backdrop in mind, and inflation running considerably below our 2% objective, nevertheless the committee judges that an important reason for that relate to declines in energy prices and the prices of non-energy imports, and that as those matters stabilize, that inflation will move back up to our 2% target. so, with that sort of economic back drop in mind, the committee indicated in our most recent statement that we thought it could be appropriate to adjust rates at our next meeting.

now, no decision at all has been made on that. and what it will depend on is the committee's assessment of the economic outlook at that time and that assessment will be informed by all of the data that we received between now and then. so, what the committee has been expecting is that the economy will continue to grow at a pace that is sufficient to generate further improvements in the labor market. and to return inflation to our 2% target over the medium turn. if the incoming information supports that expectation, our statement indicates that december would be a live possibility. but importantly, we made no decision about it. now, it is -- you asked about the timing of such a move.

the committee does feel that moving in the timely fashion, if the data and outlook justify such a move, is a prudent thing to do because we will be able to move at a more gradual and measured pace. we fully expect that the economy will evolve in such a yeah that we can move at a gradual pace. after we do so, we will be watching very carefully whether our expectations are realized so when my colleague, governor branard mentions inflation is low, if we were to move in december it would be based on an expectation which i believe is justified that with an improving labor market and transittory factors fading that inflation will move up to 2%.

of course if we were to move we would need to verify overtime that expectation was being realized and if not, to just -- adjust policy appropriately. i would also like to emphasize that i know there's a great deal of focus on the initial move. it's been a long time that interest rates have been at zero. but markets and the public should be thinking about the entire path of policy rates over time. and the committee's expectation is that that will be a very gradual path and depend on the actual performance of the economy. >> the time of the gentle lady has expired. the chair recognizes the gentleman from new jersey. >> okay. so there you have it. janet yellen saying the december rate hike is a live possibility, she read it, she was prepared

for it she knew exactly what she was doing. >> yes. i think that was an intention she had to give that message. i'm trying to turn on the mute button from this feedback here. the issue is that she laid it out there and said that the economic variables that they're looking at have to be met. but it is a live possibility. the committee -- that's what the committee wants to do it's important to see the language she said. it's the committee not nef necessarily herself, but it's prudent for the federal reserve to act because it will allow the fed to move on a more gradual way. she tried to refer to the broader path of rates which will be shallow and relatively gradual. >> in addition, steve, explicit -- the set up was in october, given what happened elsewhere in the october that it was appropriate to put a rate hike on the table and then

emphasize how transitory the nature of inflation can be. once you had the move down in energy prices it fall s down to other theories, and then inflation is shown to rise normall normally. >> that is the expectation of the federal reserve. there is evidence that that will happen. it is unclear, there's a debate among economists how long that will take. is it possible by december for those things to work their way through or is it more of a matter for next year? the expectation is that the dollar won't appreciate forever and that oil prices won't fall forever. >> as a footnote, it's worth noting that the dow only moved from plus 11 to minus 29. only a 40 point move on that reassertion from janet yellen. steve, we'll let you get back.

david, over to you. >> we've been watching earnings from some of the major media companies over the last 18 hours. cbs after the close yesterday, fox this morning. i want focus on time warner. it reported earnings this morning. they were fine when it came to reporting for its third quarter. that being said the conference call began at 10:30. on the call moments ago, hence the reason you're seeing that stock have a sharp decline, they updated their 2016 targets. you may recall when they would fighting off fox they came out with aggressive targets. that's a year ago last summer in which they said thaeearnings fo6 would be $6 a share, and '18 8

dollars a share. they say it is more likely to be around 5.25 next year. they are talking about the impact of foreign exchange next year similar to this year. they have plan s s to increase towards brands that will vez na resonate with new partners. that is the number, that was shared on the conference call. not in paper this morning where they gave it's the outlook for the remainder of 2015, hence the response from the market when the words came out of the ceo's mouth. 5.25 next year. below the estimates of most an lats who were not at 6 bucks, few people believed they would be able to get there, but certainly far above 5.25, hence the readjustment. >> where walmart treads in informing the market, time warner follows.

>> always a question could you have put this out there. there are conferenceses where they can do that. it's rare to see them do it in a call and surprise the market to some extent. >> session highs for the treasury, as janet yellen testifies. and still ahead, groupon taking a big hit today. that stock down 30%. it's back t-mobile's most popular family plan. get 4 lines with up to 10 gigs of 4g lte data, each. just $30 bucks a line thats 10 gigs each and no sharing need new phones for the family? get the samsung galaxy s6

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on, and once they heard that tesla would make at least the low end of the delivery guidance, shares started moving higher after hours, and that has continued today. here's the delivery guidance from tesla. in the fourth quarter the company plans to deliver between 17,000 and 19,000 vehicles. almost all of those will be model s, but increasingly there are more model x models coming on. that means for 2015 they will deliver at least 50,000 and perhaps as many as 52,000 vehicles. there are some challenges when it comes to model x production. they talked about that yesterday on the conference call. there were also questions about tesla's autopilot and this technology that we saw roll out within the last couple of weeks. remember, we were in new york testing it. elan musk said on the krchts call they've had positive results from those using the technology. no accidents due to autopilot. in terms of the future and when we might see autonomous drive vehicles, here's what musk had to say on the conference call

last night. >> all cars will go fully autonomous in long-term. i think it will be quite unusual to see cars that don't have full autonomy, let's say, before new car production in the 15 to 20 year time frame. for tesla it will be a lot sooner than that. >> how oon he wouldn't say, but clearly they are encouraged by the early returns that they've had in terms of what they're seeing from the autopilot technology. one other note, the model 3, the mass market electric vehicle that's coming out by tesla over the next couple of years, late 2017, they're going to unveil it, guys, early next year, probably in march. that will be a big deal because that's the mass market model that they have been targeting for some time. >> wow. thank you very much. 10% gain for tesla shares. thanks, phil. coming up, more on facebook earnings later today with tech investor mark and we're keeping our eye on capitol hill where

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two days to go until the big jobs report. that means an opportunity for you to nail the number. don't forget to tweet us your predictions for the october nonpharma payroll report at quack street, and use the _#nail the number. the luck where i winner will receive this ""squawk box"" 20 -- the squawk on the street gang. it's too big for me to hold up. you'll have one minute before the jobs report releases on friday to tweet those predictions. good luck. we're all going to sign it. it's got fleece on the inside. it's perfect. >> profits? we don't need no stinking profits? tesla up strongly even though profits -- rather, the loss was bigger than expected. we will look into why.

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janet wrelen before the house making additional comments on interest rates. she was urged by alcal congressman brad sherman not to hike rates and was asked about the potential affect on housing. yellen said she expected a gradual rise in rates as if that increase in rates should not hurt housing along it happened in a gradual way. she said the fwrad wal recovery in the economy as well. if you look very quickly at what's happening with the two-we're, you can see a spike on yellen's comments earlier today where she said december is a live meeting, and all of these comments kind of justify or potentially justify a rate hike potentially in december. carl. >> yeah, steve. that two-year high since 2011. we'll keep our eye on that. thank you. >> good morning. it is just past 8:00 a.m. tesla headquarters in paulto although wroe. just past 11:00 a.m. on wall street, and squawk alley is live.