awakens" opens on december 18th. bob iger says he expects big things from the new lucas film. >> when we bought lucas film, i knew there were global interests in star wars movie. there had not been a film out in ten years is while we had strong instincts about level of interest and what it might do, we had no idea -- i will say to you in all honesty standing here tonight, interest in this film worldwide has exceeded expectations by a lot. >> that does it for us. join us tomorrow. "squawk on the street" begins now. ♪ good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. it is fed day. the start of a two-day meeting. the pre-market rallying here after a recovery yesterday that warning from 3m taking some of

the shine off. europe higher, the price of brent getting relief. back home, november cpi with a two handle year on year. hat fed hit its target ahead of tomorrow's decision? anticipation from the markets. the fed's two-day meeting starts today. tomorrow is the highly anticipated announcement, will they or won't they? >> shares of qualcomm are up in the premarket on news they will not break into two. and apple's losses continue, one of the key suppliers slashing guidance today. first up, today's the day the fed kicks off the two-day policy meeting. many expecting it to end with the first rate hike in nearly a decade. futures are off their highs of the morning after 3m cuts its current year guidance. oil giving up gains as well, wti hovering around $36 a barrel. interestingly, the opec

secretary-general says that low prices can't continue, and they reiterate their guidance that they think non-opec supply will come off next year. >> definitely will. a lot of this junk bond scenario that we talk about involves 300 billion in debt. a lot of it has to default because there's not enough cash flow. also i don't think you want to make a big bet and move into iran and spend a fortune if you don't have a quick payback. many oil companies have cut back the big drilling budgets, there is still tremendous cash flow. the strong players in the united states, the independents, they have asserted themselves. the men from the boys, totally separate. you can tell who is doing terribly. another critical thing, just back over 3m, my travel trust has a small position in 3m. want to be bigger. go through 3m, i know everyone will sell today. i urge people to look. this was not a shocker.

did anyone think that ing inge thulin would go up in this? 3m, is anyone shocked? the stock was up two bucks in anticipation of the meeting last night. if you want to sell the rally off of 3m, you're basically saying ignore everything that you heard about 3m weakening. >> prior was 7.60 to 7.65, and they straddle next year's guidance. >> i thought it was going to be about 7, honestly. it's amazing they can do these numbers. this is a big company part of the world slowdown. at the same time we have boeing with a much bigger dividend than i thought. >> 20%. >> got a gigantic buyback of 14 billion. enough big cap stuff in the marketplace. a lot of people are look at

stocks like 3m and saying the world is slowing. who thought it wasn't? i don't know, bullard? the fed? a couple guys in the fed think it's not slowing. is there any evidence? you have car registrations up 14% in europe. we had one china number that is good. kind of a no-growth environment. it's hard to grow in a no-growth environment unless selling directly to the u.s. consume ner their ho consumer in their home. >> the fed sees enough growth that they'll raise rates. >> employment. >> right. even in the face of a bond market that has not seen tumult like this in quite some time. continued yesterday. concerns, at least, illiquidity is the concern. is it a one-timer? is it not? we don't know. >> i think it's limited. no one will feel it's limited

while it's happening, that's because the people victimized by it are regular individuals who went in, they're not hedge funds. this is not like the bear stearns jaffey case, that was a hedge fund, where are they valuing things? these are individuals, unsophisticated -- >> that was the beginning of the turn overall when credit shut off completely in the summer of '07. if you people believe this will be that -- >> it can't be. >> because the underlying credit of t being referenced was crap. >> and it's not bonds. it's a structured loan. to find a buyer of a structured loan in a heartbeat, impossible. who knows where these things were valued on their sheets. i'd like to note. when they put out reports, valuations were not that bad. >> my point is you have the fed

raising -- 100 billion maybe. >> doesn't concern you. >> it does concern me. i'm saying that the fed -- if you just base it on employment, the fed feels like it has to do it. i look at the world as slowing. to me, them raising rates is silly. like at the structure products and think it's -- but i think it will be limited. a week from now, it won't be as much focus as now. the people in this stuff didn't know what they were buying. a hedge fund -- if you had redemptions and these were hedge funds, you would be hard-pressed. >> you said third avenue. there are other funds also liquidating. >> i'll put it out there that the reed fund, that was shocking. that's like a plain vanilla fund. >> people writing that the high yield story is unlikely to dissuade the fed from moving tomorrow what do you make of the

cpi number in light of that? >> i don't think there's inflation in the system. people say we have to normalize based on employment. if that's all they care about, they'll normalize. if that's all they care about. they run on employment. when you look at where is the spending going from the gasoline? you don't see it. when you look at what a dollar general ceo who is very smart says, look, we have strapped consumers because of rent and healthcare, they don't care about that. they made up their mind. i think they made up their mind. obviously, if they don't, at this point if they don't raise, people say they know something about the junk market that we don't know. >> that will really scare people. >> yeah. >> if they don't raise it at this point, people will say okay, let's go back to the well and figure out who is failing? they're locked in. if they do a statement that says, okay, we've done this, we'll wait, people on our

network will wait until the afternoon to say that you shouldn't believe them. maybe until 4:00? people come out and say don't believe that. >> so cynical. qualcomm saying it has decided not to break itself up, despite pressure do so from partners and legal scrutiny from regulators. qualcomm says maintaining current structure gives the company strategic benefits. the chipmaker raising fiscal first quarter guidance. there's dialogue on the other side warning about mobile issues, that's why a lot of apple suppliers are in problem. we have a piper jaffey number saying be careful. iphone will be -- it's a positive piece about iphone. at the same time i totally recognize when you have a supplier cutting very big, people will say that the supply chain is weak. i said over and over again, this stock sells at 11, 12 times earnings, that's because people expect that the iphone won't be as big. if you get upside -- this is

like 3m. 3m at 1.57, i don't know why it was there. everybody knows that apple iphone is weak. when every day someone comes out and says apple iphone weak, i say that's why it's at 1.111, maybe it should go to 108. >> last april barry rosenstein joined me and took a stake in qualcomm. at the time, they said look at a split. didn't endorse the idea, they did get two directors on the board. while this may not be that large of a surprise, something we did not know about is the composition of the special committee of six directors, including the presiding director, tom horton. used to run american airlines. delivered them out of bankruptcy. so, he was one of them. two independent directors, my

point is they did do a deliberate look at this. it wasn't as though the board just en masse said forget it. they did take a close look. >> i totally agree with you. >> they seem to think, simply put, these two businesses do derive value from being together. that chips, you know, i.p. comes from the chip business. you get a lot of intellectual property coming out of the chip business. and the money from i.p. goes back in to the chip business to help it continue to grow and develop new i.p. and that there would be terminal value destruction if you separated the businesses. there were plenty of analysts out there who thought the same. looking at goldman, research from earlier last week. they say unlocking some of the parts value by splitting up the chips licensing business would not be a good move at all. value destructive in the ll long-term and unlikely.

they have a lot of things to worry about, not the least of which, will samsung go their way? they had the good deal with jao mi, perhaps the beginning of momentum there for a company that needs it. some say they should buy back more stock, though they have already committed to a large buyback. so we'll see. not great investment thus far certainly for jana. >> i agree with the special committee, serious special committee. i felt division is not what is needed. what is needed is intellectual property being held up and not being dismissed by big dust kerker customers. >> i should add i put a call in to mr. rosenstein, i did not hear back from him. >> it's about payment.

the chinese companies are yuusi the technology this will work for 5g. >> for what. >> it worked for 2g. 3g. >> okay. >> do people hate qualcomm? yes. does it have a good yield? yes. is it part of the cohort which is cell phones which is like the goo within gowanaus canal. i disagree with that analysis, but that's what people say. the upgrade cycle is not working out. that's what people say. >> absolutely right. >> everyone who wants one has one. tim cook said specifically that's not the case on the last call. the stock acts as if -- the value of the stock reflects that there's not going to be anybody other than china buying a new phone. >> maybe india. maybe a couple cheap ones in india. when we come back, the self-proclaimed king of all media striking a deal. howard stern giving sirius xm a

boost. we'll talk about his new deal. look at the pre-market. close to session highs. get to more asset sales of ge, some lofty price targets, initiation over at amazon. more "squawk on the street" from post nine in a minute.

sirius xm rising in the pre-market. howard stern announcing he is staying with the satellite radio service and will continue to produce and host his show on sirius xm for the next five years. the agreement gives sirius access to stern's audio and video library for 12 years. 33 million subs in the u.s. and canada, a large part of that is due to howard. >> definitely. this is a combination, howard and auto sales stock. you have go both going. when both are going, stock goes higher. people bought low when they didn't think he would come. howard is still king of all media, car sales are good. >> it's liberty media that owns or controls this company. owns a majority of the stock. >> nice price they got in. >> they did.

most of the cash flow that's generated from this company, free cash flow, goes towards buying back stock and accruing up their ownership stake. talked to jim myer a month or so ago and we talked about their key asset, mr. stern. >> howard's show has never been better. never been better. if you listen to it, we're just really pleased with where it is. if you listen to howard, howard will tell you he couldn't be happier than where he is right now at sirius xm. he will tell you he and i have a great relationship. we only disagree on one thing, that's value. all kidding aside, i'm very hopeful that we'll get an agreement done with howard. we very much want howard on sirius xm for a long time to come. >> apparently they got their value figured out. 12 years. >> wow. that's big. big, long-term -- take that off

the table. >> even jim cramer doesn't sign 12-year deals. >> i don't sign 12-year deals. no, i don't. good point. >> maybe you could. maybe we can't deliver the value. >> um i -- i don't know. we'll take that one off the desk. we discuss that during the commercial. >> someone just mentioned to me, lebron signed a lifetime deal with nike. lions gate trying to get hunger game prequels off the body. a lot of media companies want to lock it in. >> nfl, they want to lock in because everybody fears youtube. did you see these nfl contracts? >> iger rolled the table. in terms of signing up free espn, signing up these long-term deals. one of the key questions for disney, monetizing that over a long period of time, where you have agreements that perhaps say

you can go down as 80% of subs in terms of what they're obligated to offer the package to, should get interesting. >> they had to look at what google -- alphabet can do. they finally got someone who understands sports. they get that international rights contract -- >> may need to be forced to monetize it broadly simply than over cable subs. >> culturally i don't think that -- just my analysis, alphabet people, youtube people were not interested in sports. i'm not kidding. i've been behind the scenes doing a lot of work on this. they're not as interested in sports as fox thinks they are. but that can change. and cbs, les moonves. after the mad dash, the opening bell, espn and disney are here celebrating college football. we'll get to that. in the meantime, futures close to session highs. more "squawk on the street" from the nyse after the break. me on,!

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where are we starting? >> kmt, most people have not heard of it. they do tooling for a lot of -- big industries. here we're talking about china automotive, u.s. and china, coal mining. oil and gas activity. they're saying this morning the company expects as much as a 30% to 60% decrease in previously

announced guidance. 30% to 60%. time for the fed to cut, right? >> what's going on in the industrial economy. >> there's the industrial economy. 3m, i already said that was telegraphed this was not telegraphed. to have 30% to 60% decline is different from a shade down. shade downs are perfectly reasonable. what is caterpillar going to do off this? stock should go down. let's watch caterpillar off of kennametal. >> like ingersoll-rand what have they been doing? >> not as much oil and gas, but kenna metal, has metal in it. sell it. you wouldn't be scary clsa who came out today and said oil

stocks time to buy. hess, total, stat oil, wow. bp, hello. a lot of people like chevron today. people want to call the bottom in oil so badly that they even like royal dutch. >> are they going to do that deal to buy bg? bg to me is grad gilbert. >> they point out most of the consideration is in royal dutch stock, which has also suffered as much as bg has. the real give up is about 4 billion euros or so when you throw in a break up fee, even less than that. >> you could buy the debt of 100 different oil companies in this country and come up with a nice parcel of oil that may be good at 35 bucks, 40 bucks. >> seems like they didn't need do the bg deal. >> i think this deal will go down as a fairly stupid deal. >> fairly stupid. >> stair fairly stupid, not tot

stupid, but fairly stupid. they hate the starwood deal, the jarden deal, the newell deal. pfizer allergan, but they love vrx because it stayed independent! >> this is like a different opposite world. look at that. he's walking off. >> it's fine. everything good, david. >> we'll talk some deals and valeant next. announcer: sleep train thanks all those

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you're watching "squawk on the street," live from the financial capital of the world. day one of a two-day fed meeting today. cpi hits 2 year on year. oil managing to climb almost back to 37, jim. we're in a market that oil -- i was doing work last night. alphabet, formerly known as google, ticked up $20 when oil went up 75 cents.

no correlation to anything else. i did a correlation analysis on "mad money." it was amazing, that's what controlled things. when you're in that environment, anything goes. meaning that if oil is going to move a stock like alphabet, if oil is up, you'll have a nice day. i think it's ridiculous. it is totally ridiculous. people are not spending additional gasoline money. they're saving it. corporations have seen no benefits. i understand why we have seen only the down side of oil going down and very little of the upside. you know, oil is in charge -- if oil is in charge of alphabet, it's in charge of everything. >> yeah. comes on a day where moody's cuts their forecast for 2016 oil prices. they go from 48 to 40. average for the year is they say even if we get more consumption, it's not going to match the increase in fly. >> they're right. it's all saudi arabia. the saudis have to stop.

nobody will save the fossil fuel industry. >> let's get the opening bell at the s&p, at the bottom of the screen, more green than yesterday. at least until that turnaround happened. at the big board, espn, celebrating the college football playoff semifinal games on new year's eve. specifically the orange bowl, the cotton bowl. over at the nasdaq, csw industrials doing the honors, as if disney doesn't have enough going on with that "star wars" premiere in l.a. last night. >> 360 disney experience! now we just need cable subs to go from 29 92 to 98. >> that's not happening. it's gone from 29 down. >> don't be negative. >> since it -- it was october 30, 2012 that disney bought lucas film, 4 billion in cash and stock. since that time, bizny disney u.

lucas was paid partly in stock. >> disney has a history of reinventing itself. we're looking at cable numbers. that is looking at something like abc. i remember when abc first started going down. everybody sold disney it was a bad idea. the franchise, many different levers. i have said disney is a great long-term buy. it bounced from 92 up. the hoopla had been tempered because electronic art, the games had not been selling well, the toys, early returns were not good. this is -- having seen many people watch perry scope of the red carpet last night, there's a lot of enthusiasm here. >> they shut down four city blocks in l.a. last night for the premiere, more than they shut down for the oscars. >> i think the film is worthy. i believe the film is a fine

film. the audience will decide or vote. we don't know just how much it will do we're confident we're bringing forward a film that people around the world will love. >> it will open on a record 4100 screens no movie has ever done that. a lot of them will be imax. >> imax, also the way, doing quite well in china. >> there's no stopping that man. >> not done a bad job. he's not done a bad job. >> no, no. he's unstoppable. >> amc. >> that's right. >> i think that disney -- honestly, the word on that disney video game, on the "star wars" game put a damper on the expectations. this is why you can have a pop here. >> we should discuss valeant, which is up over 13%, well above

$100 a share. the company will be holding its investor day tomorrow. i believe it's tomorrow. this morning releasing important news that the market is responding to namely said simply it is replacing that relationship it had with philidor, the specialty pharmacy company, where oftentimes it ended up swallowing what the insurance company wouldn't pay, instead it's going with a different model now. it's getting a lot of drugs into walgreens at reduced prices, in effect almost cutting out its having deal with the insurer, dealing with the middleman. saying the agreement will allow consumers to immediately access dermatology and ophthalmology products. it's a 20-year agreement. it will begin the first quarter of '16 and cover jublia and some

or key determirmatological prod. earlier on cnbc, michael pearson, the ceo of the company -- and a special committee still looking at the relationship between valeant and philidor. he explained the rationale for the new model that he says will increase overall growth and profitabili profitability. >> there's lots of allegations that have been made, but nothing has been proven yet. i was unaware of any of the allegations. >> that was on philidor. we'll wait and see what happens from that special committee. as you know, bill ackman having taken a large position which he increased over time to become the single largest shareholder in the company. value act still an important shareholder here. any number of hedge funds have

been whip sawed in this thing. it's a battleground stock. today up sharply on this new approach. those positive about this company, jim, will say simply the disruptor and therefore disliked vehemently by many of its competitors, others will say different things about its business model. going as far as saying it was unsustain unsustainable. >> when it did get to the 70s, people bought it. how much do you think this is an endorsement of a major company sitting down with valeant and doing a deal. doesn't that say valeant is not a pariah anymore? >> maybe. these are real drugs that people dry. certainly determirmatological

products. if walgreen can get them at cheaper prices, people become attached to their determimedici. you're talking about putting stuff on your skin. >> you're right. i think what happens is that this had been a major source of pain for the hedge funds, bill ackman, and the source of pain is alleviated, that brings buyers out. >> 52-week high, $263 to put it in perspective. >> again, you had a thing that was an eyesore, and we were looking at ulta for a while. stocks are concentrated high-growth stock, using ulta as a metaphor. high growth is back. the names shorted are back.

people want to own stocks again whether it's a lumber liquidators. >> i was just going to mention that. >> whitney tilson coming on saying that stock is done. and all these takeovers which have been greeted poorly. suddenly money coming into those. it's almost as if, all right, we've been short, we've been short. maybe we have to cover ahead of the fed. >> tilson in that blog post says leads me to believe senior management of lumber wasn't aware that the company was selling chinese made laminate that had high levels of for m l formaldehyde. >> a lot of hedge fund gifts out there. >> a lot of hedge funds running scared out there. which is one reason we're seen the reception to deals be so poor lately. we remarked on it yesterday. we had the executive chairman of jarden and ceo of newell

rubbermaid. that deal did not get a good reception. >> not at all. >> dupont and dow, not particularly well received, pfizer/allergan. there have been a series of deal announcements that have been different from the reception in the marketplace, through this incredible year of merger and acquisition activity, you saw the acquirer stock price go up. a lot of people like that newell deal. everybody gave me some explanation, none added up to much. >> people say jarden is like, wild, untamed bees. newell is buttoned down. hawk is a good manager that would have been the best performer in the so-called consumer package industry. they can get jarden. they can do a lot with it. they can go to walmart, say we're powerful, too. my travel trust owned dow, i

said he did this great thing, and yesterday dan lobe said the deal was done because of -- >> he likes the deal. >> he likes the deal, but he made me feel the deal was stupid. that's not in his interest, that's the takeaway. the money is coming out of this market into those things. what do people want? visa, mcdonald's, home depot. back to the same stocks that have given them the performance this year. income donald's, visa, home depot. they want facebook. >> you have fanga. >> what is the second "a"? >> google sold to fanga. >> bob is on the floor for us this morning. hi, bob. >> we have a rally. really it seems to be a continuation of the rally from yesterday. this is happening in europe, too. look at germany. germany gapped right up at the

open. this is a two-day chart. i want to show this because we regained all the losses we had in germany. we closed crummy in germany yesterday, it's all back now. oil turned around. energy stocks are leading now. financials are doing well. consumer discretionary. you can see the industrials lagging there. that's the effect3m bringing down the numbers good luck predicting the next week or so. we have tax selling season, we're in the middle of that. end of decision, seasonally strong. we have a big quadruple witching expedition. on friday, a rate hike lightly. the opinions with all over the place. it's interesting when luke at volatility, what the market is afraid of now. the volatility in oil is elevated. in equities, volatility is up.

in credit, volatility is up. everybody is thinking the fed rate hike is priced saut was on. he said there was money waiting on the vsidelines that could soften any dip we may be getting. and dialogue semi, they did lower guidance overnight. 15% lower than expected. the key thing is 75% of their mobile revenues come from apple that has people talking about concerns that there should ab short fall in some iphone sales at this point. if you look at that, dialogue semidown 4%. look at some known suppliers of apple, rest of the market note th not that concerned about that apple essentially flat on the

year. might be up 1% or 2%. had the big drop in july and august. 3m cut its full year forecast. in august it was 7.37 to 7.93, in october they cut it from 7.606 to 7.75. this is the second months they cut it to 7.55. the key here, middle of the third quarter was a problem for most industrials. that's when the market started to move to the down side. the market anticipated some weakness in the i industrials. david, back to you. >> enough. one area that viewers know i like to cover, it's media. it is worth knowing media stocks have been weak over the last ten days, not today. in fact, we have a nice rally in many of the names that we often look to as the main providers of content, time warner, dpis kisc, viacom, fox, cbs another one.

when luke at the last ten trading days, these names have been hit hard. falling to levels we saw earlier this year when there were those concerns, of course, about cord shaving and cord cutting. look at discovery, one week down almost 8%. that includes the move up today. same with time warner, time with viacom, same with fox. many of these suffering -- y the s&p was down, they were down much more. why? i was asking around. it's interesting. last week leslie moonves at a conference said that i think apple will be delaying their introduction of this bundle of packaged various channels to -- and streaming over apple tv to potential subscribers. apple never confirmed if they were holding back or not. he said they were. a package that could be $40 a

month, include ten cable channels, cbs, many others. that was seen as a positive for media companies. not sure why, at the same time it reflects the fears felt broadly in terms of the breakup of the bundle into smaller, smaller packages. perhaps presented new opportunities for companies to monetize content. that will not happen any time soon soon, it would appear. maybe it gets harder and harder to figure out a terminal value for these companies. as of the close yesterday, discovery down 14% in ten trading days. time warner and others down 10%. nice rebound today, also included comcast, down sharply. >> they were around town saying some things. a lot of times they come out and say theme parks are good. many levers for some of these

companies. >> disney continues to command a higher multiple. finally, it's always worth ending with netflix. this has set the tone for everything, netflix. >> wow. sound like me. >> the market value exceeds $52 billion. look at that stock even the last two years. there it is in a nutshell, the story from media. people are going this way, and it's about creating value. almost larger than fox's market value. almost. >> why would we think that that shouldn't be the case? moving into europe, china. >> 31 scripted series next year. >> there's been a sequel to every single one. they're spending a lot of money. >> they are. >> 50 billion. this is one of those, just couple stocks in this market

hard to measure and guide. because they have karma, so to speak. if you want to get existential, people feel the market gap is too small. >> it's up 151% this year. >> now they tweeted this morning that president underwood of "house of cards," will make a special announcement tonight during the cnn debate. >> really? i've been thinking about going his way the whole time. he's crafty. smart. gets the job done. >> yes. >> tough to the russians. stands up to the russians. not sure how he feels on immigration issues. >> let's get to rick santelli at the cme group in chicago. rick? >> good morning, david. everybody seems to be waiting for the fed. today is the first day. what's going on? rates up, dollar up, mainly because stocks stabilized and given us more than stabilization. giving us 200 points. these are the highest two-year note yields should they close at these levels since may of 2010.

only a couple basis points away from 1%. year to date, five-year fascinating. the reason i picked year to date, here we hover around the 169, 170. right in the middle there, the five-year, it's high of the year in june, close to 179. two day of tens, the long end is not keeping up with it. that's why the curve has had flattening over the last several months. the november 1st chart shows you. you want to pay attention to the post two unemployment high yields around 234, 235. bunds, up about eight basis points. dollar/yuan, seven days in a row down to the dollar, today is number eight. down again. these are the lowest level against the green back since july of 2011. carl, back to you. >> thank you very much, rick

santelli. oil continues to rebound today. bertha is at nymex for us. good morning. >> good morning. a bit of a bounce here after we saw yesterday oil approaching that great recession low. seeing some folks take a bit of caution here from the short side ahead of the expiration tomorrow of the january contract. we'll also start looking at inventory numbers. this afternoon we'll get them from the api. tomorrow from the government. you look at wti, it is firming up a bit today. not so when you look at natural gas. the forecast continues to be abysmal. natural gas touching a new low again this morning. pennies above the all-time low from 1992 of 1.80. the problem, of course, the forecast. looking at forecast for chicago on christmas eve that will be higher than dallas.

chicago set to be about 56 degrees. here in new york, 63 degrees on christmas eve. something i have never seen before, we had a guy on a jet mobile on the hudson in december just little bit before christmas. never seen that before. >> white christmas here unlikely at this point. thank you very much. dow is up almost 200 points. actually it would be above 200 if not for 3m which is the worst performing component as they trim guidance for '15. i'm here at the td ameritrade trader offices.

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time for cramer and stop trading. >> i think what we're seeing in disney is a recognition that this will be on 11,000 screens. when you go to movement i hathe it will be on this one this one. electronic arts, the video game. it is maybe a false tell. it may be a false tell, that has

people believing that disney could be a buy. i don't want to say on the toys -- the toys are selling well. the thing is not even out yet. "frozen" toys, "frozen" -- you didn't buy the "frozen" toy before you saw the movie. any way, the stock is up for good reasons. it's not just, hey, i hear the movie has heart, fun. there's something here. the stock is down huge from -- you're just nodding. >> i'm think being whether carl is going tonight, if he has seen it. >> i can't say, actually. i can't say. later in the week. >> regina is offering to scalp me her tickets. >> you mentioned toys, mattel having a heck of a week. >> man. >> mattel off the highs hit yesterday. you have go back to july to see prices like that. >> they contracted with salesforce.com to find out what people wanted. people from mattel at the dream

force. that one is a winner. >> hasbro again. >> michael shea, great research director, remindings that you chevron and exxon did not hit lows. remember, they have well in advance telegraphed oich eed oi. >> what's on "mad" tonight. >> we have some controversy here. restoration hardware. stock is down horrendously. is that right? then we have a good biotech, seres. is that right? restoration hardware. is that right? "star wars." >> i'll see it. >> "star wars" cultural phenomenon. there was guy who cut it last night. he didn't like the outcome of espn and cut the cord. changed the whole numbers.

>> we're back after a break. that's why i have the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line. what's in your wallet?

good tuesday morning. welcome back so "squawk on the

street." i'm carl quintanilla with a full cast today. sara eisen is back. simon hobbs, david faber. dow is enjoying a nice 200-point rally as oil rebounds a two-day fed meeting today. news on home builder sentiment. diana olick has that. >> home builder sentiment down 1 point in the monthly sentiment index for september. that is a miss. the street was looking for a one-point gain. they got a one-point loss. we are in positive territory but barely up three points from a year ago. the builder did not cite mortgage rates in the report, you have to believe that is weighing on them. they say they continue to struggle for high cost for lots and labor. current sales conditions down one point to 66. sales expectations down two points to 67. buyer traffic down two points to 46. that last one still the only one

mired in negative territory. the northeast was the weakest territory at 49. midwest had the biggest drop down 5 points to 55 a miss a drop of one point on the monthly home builder sentimentment back to you. >> stocks near the highs of the day. rising oil prices are helping. investors awaiting on a possible rate hike from the fed. for more on the markets, joining us is bruce bittles, and michelle meyer. good morning to you both. >> good morning. >> michelle, after cpi this morning, any reason to think this is not a go? >> it's a go. i think cpi confirmed that we are seeing at a minimum some leveling off in terms of headline and core inflation. perhaps some small signs that inflation pressures just could start to be turning higher. if you look at one of the aggregates we like to focus on,

core cpi, a slight pick up. subdued but maybe heading in a higher direction. >> if it's a go, do you expect to see a number of dissenters? we heard from two key governors voicing caution when it comes to raising interest rates. very unusual to have governors dissent. >> it is unusual. they sounded more dovish and expressed caution. it's a possibility. it's not our baseline view. our baseline view is that we won't see dissents, the committee can get together to satisfy the dovish members and the more hawkish members. we don't think there will be dissent but those two candidates are possibilities. >> when it comes to market action, what are you looking for in terms of language? the idea of the fed does go, it

will be one and wait. are you looking for the word gradual? >> i am. i think janet yellen has already transmitted that. she said the first rate hike is not important, but what follows that's important for the markets. the markets are expecting a rate hike. i don't think tomorrow will be as dramatic as it might have been. but i think the fed will be persistent in suggesting that future rate hikes will be slow and measured. >> bruce, picking up the point that michelle makes, on inflationary pressures building, once you move through the calendar and the previous falls in energy fall out of the series, if you like, then you could quite easily get towards a much stronger core inflation figure, couldn't you? >> that's correct. we pointed that out in our outlook for 2016 piece. a couple things concern us. one is that the consensus

estimates are that inflation estimates will remain low for as far as the eye can see. that's troublesome. more problematic is that we are seeing inflationary pressures in shelter, in healthcare, and now we're seeing some wage increases for the very first time above the 2% level. that's a sign to us -- >> forgive me, bruce. just to cut to the point, doesn't the idea that they suggest rate rises will be gradual through next year, isn't the data beginning to conflict arguably with that and our suspicion is that the rate rises may not be as gradual as they would have us believe? >> not yet. i don't think inflation is around the corner. i think they'll be gradual in their commentary. inflation is on the table for the balance of 2016.

if it starts to increase at a more rapid pace, certainly that will be problematic. >> michelle, do you agree that at the minimum inflation will be a 2016 surprise to the upside? >> i think it's possible. it depends on whether or not we see wage inflation. there's early signs that wages are picking up, but it's still quite subdued. there's a lot of buy furcation that is leading a portion of those that are on the outskirts of the labor force, seeing signs of wage growth. our view is that wages will be trending higher and that will generate some higher inflationary pressure. i don't think you'll see a breakout in terms of inflation that will prompt the fed to abruptly adjust interest rates higher. it will be slow, but it's important it's a cycle, not a one and done or two and fthroug.

>> bruce, if you look at stocks hitting record highs, mcdonald's, kimberly clark, kroger, consumer staple companies that don't see higher growth. 3m lowering guidance. is the stock market telling us something about the economy that the federal reserve needs to be paying attention to. >> i think the market is still concerned that we're in a slow growth economy and there is some concern, of course, that even a 25 basis point hike, even though it's almost a rounding error could still prevent the economy from going above 2.5% which we need to get -- if we're going to get an earnings boost, certainly gdp has to be somewhere closer to 3% than 2.5%. so, i think that's the major concern. >> bruce, michelle, thank you very much for that. we'll see what happens in a little over 24 hours. some breaking news out of los angeles. our sister station, knbc, reporting that all students in

the los angeles unified school district are being sent home that comes amid reports of some kind of threat against the schools. additionally the bus yard in gardina, california is on lockdown. and drivers have been instructed not to take the buses out of the lot. school district officials are set to begin a news conference momentarily to clarify the situation. no official reason has been given for the shutdown. we will monitor that as the good morning goes on. as oil prices have tumbled over the last few weeks, virgin america stock has gained about 2% should it have done more? can the trend continue? david cush will join us to discuss that and more.

let's take you live to laex los angeles where the l.a. school superintendent is briefing on the situation. >> i want every school searched to make sure that it is safe for children and safe for staff to be there on wednesday. i will issue a statement late this afternoon after the chief, chief zuckerman has informed me that schools have been searched and it is okay.

i will keep you informed ongoing during the day. if there are any situations. one of the issues i've been worried about is children who walk to school. we have great many of those. i've asked the principal to make sure that those children are at a specific gate so they can be given instructions, kept together and so that we can make contact with parents to pick up their children or to make sure that they get home safely. not independently, home safely making sure that their parents are notified. we have sent a connect-ed to all parents letting them know of the action i've taken.

i will answer some questions after the chief and board president speak with you. >> superintendent, could you start just with the beginning a couple people arrived late. >> good morning, chief of los angeles school police department. and i just want to reiterate what superintendent cortines already stated. earlier this morning we did receive an electronic threat that mentioned the safety of our schools. as a result of that threat, not only los angeles school police department -- >> can you start again? >> i'm going to continue on. as a result of that threat, the los angeles school police department as well as los angeles police department and the fbi were notified and right now the threat is still being analyzed. in an abundance of caution, as

superintendent cortines has indicated, we have chosen to close our schools today until we can be absolutely sure that our campuses are safe. until it is deemed safe by law enforcement and concurred with by our district officials, which we believe will be able to occur by the end of this day, we will keep those schools closed. the investigation is ongoing. i won't get into the details. i do want to say this, this is important. that the threat that was received as far as the l.a. unified school district is concerned pertained only to the l.a. unified school district. i knows there been many calls. we know of in other threats that we're aware of unless other agencies have gotten specifics outside of l.a. usd that this

pertains to the threats we got to our schools only. we do not know any other information about any other threats within the county region at this time. as i indicated, law enforcement will continue to evaluate the threats. >> chief, would you introduce the chief. >> i would like to introduce assistant chief jorge villegas, assistant chief of operations. >> can you switch seats? we need to get him near the microphon microphone. >> good morning. jorge villegas, assistant chief of lapd and chief of operations. the school district received a

safety threat that we're in the process now of validating or vetting to determine what, if any, validity it has. as you can imagine, we take all threats seriously. nothing is more important to us than the safety of our kids, especially those that are coming to and from school that haven't been notified yet of this safety threat. we're doing everything we can to ensure that we conduct a thorough investigation into that threat. we'll be working with the school district as well as with the fbi to ensure that the public is informed as much as we can provide, as soon as we can provide it. >> this is steve zimmer, president of the los angeles board of education.

>> good morning. my name is steve zimmer, i'm president of the school board of los angeles unified school district. i'd like to speak, if i could, directly to families and employees. we are taking this action in an abundance of caution to make sure that every child in l.a. unified school district and every employee is absolutely safe. right now we ask parents, families, if you have not yet sent your children to school, please do not send them to school. if they have already been dropped off, we will have families meet their children at the reunion gates of all schools. i want to be very clear -- we

need the cooperation of the whole of los angeles today. we need families and neighbors to work together with our schools and with our employees to make sure our kids are safe throughout the day. we need employers to show the flexibility that a situation like this demands. we ask you to show the maximum possible flexibility with your employees who are primarily mothers and fathers and guardians today in this situation. at our school sites we have asked administrators and plant managers to report. we are not -- we are asking for

teachers and other support personnel to stay home today. once again, i want to reiterate, on behalf of the entire board of education our support for the superintendent, the chief of police, the actions we're taking today are swift, they are appropriate given the situation that we are in. and we ask for the patience, the cooperation and support of the city, the education of our kids is incredibly important. the only thing that's more important is their safety. the superintendent has acted in regards to that safety this morning. i would like to introduce our deputy of operations, dr. thelma melendez who will make a

statement in spanish. >> could we ask a couple questions before you do that? >> live picture of los angeles and some officials from the lapd and the los angeles unified school district announcing schools are closed today out of an abundance of caution due to an unspecified threat that came by electronic means. further statement also come this afternoon. they have notified the fbi, all the schools will be searched. this is the second largest school district in los angeles, 640,000 students, goes from k through 12, 700 schools. this is a massive undertaking to close school force the day as the west coast is just getting to work and school. they're in the process of vetting and validating these threats. one more listen to the superintendent. >> mr. cortines, was there any threat made to bus? all the buss were returned to the yards. >> there was not a threat made

to buses. the reason they were returned is because we're not picking up students. it was to students at schools. nothing more than that. >> the threat was to students at schools, you said? >> at school students, yes. >> mr. cortines, you mentioned some details regarding packages. you can elaborate on that? >> no, i can't. the chief, after the -- after he's met with the city police and the fbi, he will be making further statements on why i made the decision i made. >> you have more than 900 campuses, are you able to say whether these were elementary schools, high schools? >> let me tell you, i can't take a chance and all schools -- i've asked them to be searched today by the appropriate people. and appropriate people are not necessarily teachers or support

people if there is a problem. i want our chief of police working with the city police and working with the sheriff to develop a plan. we have six districts, to work systematically through every one of those schools. some of them are very large schools. some of them are schools with three and four rooms to them. but i want every school, every early education center, every adult school, i want them searched and a report made to me and to the board of education that it is safe. >> many faculty members arrive early, well before 7:00 a.m. are all campuses then being evacuated for anyone that was on campus? >> they have been told to go home. >> what happens to kids who may already be at school? are you telling parents to come pick them up now? >> yes, there's been a connect-ed. the board president reviewed that with you, they have been asked to meet at a certain gate.

the principal to be there. the plant manager to be there. no child to be left alone. i know it is cold. we're making every effort to see that we get the notification to parents as soon as possible. but i'm not taking the chance of bringing children any place -- into any part of the building until i know it's safe. >> can you clarify, this is all students, teachers, staff, all personnel, everyone involved in your campuses? >> in the campuses, yes. that is what i've done, yes. >> that incorporates everyone? >> yes. >> can you give us context? i know you can't go into the specific threat, but context for parents at home. how many threats does the school district get? how rare is it to get a threat like this? >> this is a rare threat. we get threats all the time. >> i want to ask you, dan, why was this one --

>> let him finish. >> i'm curious about this one, why it got this kind of response. >> i think the circumstances in the neighboring san bernardino, what has happened in the nation, i think what happened internationally, i as superintendent am not going to take the chance with the life of a student. remember, we do get individual threats. we do evacuate schools. we do lock down schools, et cetera, and do not release students until we notify parents. so, what we're doing today is no different than what we always do except we are doing this in a mass way. you mentioned earlier, we know it's early, but for people watching now, where do we stand for even tomorrow? >> i have no comment on that i've told you i will release a statement before the end of the

day. >> can we do spanish language now? [ speaking foreign language ]. >> if you are just joining us, we just heard from superintendent cortines there -- >> the city of los angeles closing the second largest school district in the nation for the day due to an unspecified terror threat. you heard the superintendent, ramon cortines there, talking about threats that they get threats all the time. but the spes ficificity of this with, what the world has been through over the last weeks and months, he said i will not take the chance. >> we want to go to julewe juli l.a., how massive of an effort is this to close all l.a. schools? >> the l.a. usd is the second largest school district in the country. there are more than 640,000

students enrolled between kindergarten and 12th grade. over 900 schools, 187 additional public charter schools. this is a massive area. in addition to the huge number of students, this is spread out over 720 square miles. so a huge area here, a huge number of students. as he just said, this will take a big effort to check out the schools, make sure everything is okay. and take care of all those kids who will not be going to school today. it's worth pointing out that people in los angeles feel like they're in the backyard of san bernardino. san bernardino is so close. the attacks there hit home to so many of the folks here in los angeles that people have been on edge since those attacks. two manhattan beach schools were closed last week because of what was called a specific threat.

manhattan beach is just to the south here of los angeles. and i think there really has been a greater sense of concern about potential terror attacks. this is certainly a massive undertaking to close down these 640,000 schools, keep home those 640,000 students from the 900 schools. >> okay. julia boorstin, thank you very much. we'll take a break. that's why i have the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line. what's in your wallet?

here's your cnbc news update. as we've been telling you, los angeles schools are closed and students sent home after a credible terror threat. additionally the bus yard in gardina, california is on lockdown. you're looking at it now. drivers have been instructed not to take the buses out of the lot. secretary of state john kerry meeting with russian foreign minister sergey lavrov in moscow to discuss the political transition in seyria. kerry will meet with russian president vladimir putin later in the day. tensions high at a rally for donald trump last night. he was interrupted several times by black lives matter protesters. the interruptions drew furious reaction from the crowd with some screaming and pushing the hecklers. howard stern is staying with sirius xm for another five years. the new deal includes plans for

a streaming video component to upload his daily four-hour radio program. and that's our cnbc news update. back to you. thank you very much. we continue to take stock of the developing story out of los angeles. the los angeles unified school district, second biggest in the nation, some 900 schools, is closed for the day due to an unspecified terror threat. we'll get more information on this over the next few hours and this afternoon. the fbi is involved now. we just heard from the superintendent. comes on a week in which we had the three-year anniversary of the sandy hook elementary school shooting and the superintendent specifically citing the fallout from san bernardino and other recent attacks as one of the reasons they have taken this threat seriously. nbc "nightly news" citing sources saying it was a bomb threat that was e-mailed to a

board member, school board member. that's one reason they took this decision. >> the "l.a. times" is using the word bomb threat, we didn't hear that from officials in the press conference. this is two weeks since the two shooters killed 14 people in san bernardino. deadliest terror attack in america since 9/11. obviously police officials and school board members said they were doing this in an abundance of caution. the superintendent said we get threats all the time but this is a rare threat. besides san bernardino, what's happening in the nation, what's happening internationally, we cannot take a chance on the safety of any child. >> now you have a major operation for those kids already on their way to school who arrive at school, they will be met at the reunion gate by officials and then have to be transported home in some form which is what the president of the school board was asking for. asking for employers to show flexibility that is required in

a situation like this, to allow mothers, fathers, guardians to go out and meet those children or stay at home with the kids if that's what's going to have to happen. this is now a major operation for everybody concerned. once that decision has been made, to shut the schools, how you transport -- i forget how many kids there were in that district. >> serving more than 650,000 kids. >> that's a lot of children you have to make sure are safe. >> more than 1,000 public schools. >> one of the officials said we need the cooperation of the whole of los angeles today. and isn't that the truth? you have to imagine so many parents are going to have to essentially call out from work. you have a lot of kids suddenly not going to have supervision for the day. and whether or not you can search 900 schools in a single day, i don't know. there's obviously a chance that

this can last into tomorrow. it's at minimum a reminder of the era we live in, you cannot ignore threats if you deem them to be legitimate. >> absolutely. that was made clear in the press conference today. we'll keep you posted as we monitor the fluid situation, l.a. public schools are closed. 7:34 a.m. in los angeles. 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.

glthey are. do i look smarter? yeah, a little. you're making money now, are you investing? well, i've been doing some research. let me introduce you to our broker. how much does he charge? i don't know. okay. uh, do you get your fees back if you're not happy? (dad laughs) wow, you're laughing.

that's not the way the world works. well, the world's changing. are you asking enough questions about the way your wealth is managed? wealth management, at charles schwab. we are monitoring the situation live in los angeles this morning. the nation's second largest school district, where all public schools are closed for the day because of what

officials have deemed a credible electronic threat. we don't know when the threat was made, whom it was made to. the officials and the fbi, who have been notified, are searching the los angeles schools. kids are being sent home. buses redirected home, all children in the area are meant to stay home. >> a tweet from the authorities, parents and guardians asked to bring proper i.d. when they pick up their child at school. students that have arrived at the schools, they set off before the announcement was made, they will be kept with staff until parts or guardians can be contacted. for a lot of people, a lot of disruption and a big day in l.a. >> in what is being deemed an abundance of caution. we'll await for word from officials in the l.a. area. republican presidential candidates are ready to take the stage tonight for another

debate, as a new poll shows hillary clinton would beat both testimony cruz and donald trump. john harwood here at post nine. john, terrorism, the threat, e security at the focus. >> whatever is behind this threat will be seen more evidence of the new phase we're in the president talked about the self-radicalization of people posing threats that may not be orchestrated from abroad. don't know if that's the case now, but the american people are fearful and unsettled. we have seen in polling a rapid shift in what people think is the biggest problem in the country. all year long they said the economy. now they say national security and terrorism. and that's going to be topic "a" on the republican debate tonight. all week long. president obama has been trying

to underscore his approach. try to make the case that he's on top of this. that homeland security authorities, we'll we're prosecuting strategy overseas, are monitoring threats. but it's difficult to stop everything. especially if you have electronic communications, somebody can shut down a school district with an e-mail, hard to handle. >> we don't know if there's an islamic link here at all. it could be a disgruntled employee. >> absolutely. >> the bar after san bernardino, if you're a public official, deciding whether to clear a school has shifted. you can see evidence this has happened on the streets near you. what official, if they get that threat, be it police official or superintendent not call out the entire school district. so the level is on the increase. >> the cost benefit analysis for

school districts, people who operate public facilities will be different in this environment because achieving a disruption, achieve i achieving an event that could terrorize large numbers of people is easy enough now that people have got to use an abu d abundance of caution. >> hang with us, john. we want to bring in now on the cnbc news line, chris swecker. we were talking about, it is a major undertaking to close all los angeles public schools. the superintendent said we do get individual threats all the time that we act on. we don't know anything about this threat beyond the fact that it's electronic, some news reporting that it was perhaps a bomb threat what does it sound like to you? how serious does it have to be for them to close more than 1,000 schools in the los angeles issue? >> school threats are fairly common. i mean, kids like to get out of

school, they'll call in bomb threats. this, of course, is much more serious. they wouldn't close down an entire school system if they didn't feel that they had a credible threat. in these types of threats, you look at the credibility, the source of the information, the credibility of the information, is it detailed? is it imminent? do they have the capacity? to me, this may have come in from an official source possibly. >> chris, i think i'm right in saying during the course of the news conference that we watched, they said that the fbi had been informed. i would have thought at a local level that would want to bring the fbi in right at the beginning to judge the level of that threat. or is that not physically possible? how does it work on the ground if you're a board member of a school district like this and you receive that threat? you can call instand instantly expert analysis? >> the first call should be 911.

but i find that school board members and school personnel in general are not well versed in security threats. not well trained. they have difficulty assessing threats. they should call someone right away, whether it's the local police department or the fbi. preferably the fbi in a situation like this. >> just before, you did say you thought this might have been an official threat, come from more of an official intelligence gathering operation. what did you have in mind? >> to me, to close down an entire school system, this couldn't just be a random e-mail. i suspect they get quite a few of those it may have come from someone in the school system, maybe a possible employee, disgruntled employee making a threat. there's just -- this just doesn't add up, closing down the entire school system unless they felt like they had a credible source here.

>> they're planning to search the schools. obviously there's an investigation underway. how long does it take to do something like that? >> i can't see that happening in one day. i'm sure they're closing the school system down for the entire day. there are not enough bomb sniffing dogs, not enough officers to do that and do it the way it needs to be done if you think the threat is credible. >> chris, we were discussing before you joined us about how san bernardino has changed the environment here. the fact that you've had a physical deadly attack of that nature, whether that changes the judgment calls that people in public office. people faced with public liability situations, whether those sorts of judgment calls now are materially different than they were before san bernardino two weeks ago. because you actually physically had an attack of that nature. you can help us out there? >> i think san bernardino was a game changer across the board.

they're going to take any threat seriously. in the past they might have dismissed them as random of a nut -- mentally disturbed individual, but those are the individuals that isis can recruit out of their living room via the internet. they don't have to have a lot of capacity. they don't need much to cause a lot of casualties, especially in a school setting where you have students and a captive audience, unable to move and get away. >> chris, this is john harwood. do you think the fact that in the san bernardino situation one of the shooters was actually an employee at the site at which the mass murder occurred, factors into that calculation? you mentioned the possibility that an employee, disgruntled employee may have had some communication, do you think the situation of syed farook changes the way those are evaluated? >> i absolutely think so.

the information is out there that they possibly were targeting a school, that he was inspecting schools, that put schools in the spotlight here. i think that the whole cascading series of events that have taken place over the past couple years has driven the point home about how vulnerable these soft targets are. i think the scale of assessing the credibility of the threat, it doesn't have to be all that credible to close things down, but closing the entire school system down is a different story altogether. that shows me there's credibility there. >> thank you for calling in today. chris swecker, former fbi assistant director. >> the breaking news this hour is that the los angeles unified school district has been shut down within the last hour by the superintendent because of an electronic threat that has been received to a board member, we believe a board member of that

school district. nbc is reporting it was a bomb threat. children are asked to stay at home, this f. they have not already left the school. others that have left are being met at unification gates by the staff from the school and during the course of the day they will work their way through returning them to their homes. joining us on the phone is the former cia director, jim woolsey. this is a worrying thing for a lot of people. what would you say to parents around the country watching this now? >> we have an open society, and it's easy do this sort of thing to us if someone with a totalitarian terrorist mindset is here. you can buy the explosives at local stores to make bombs and so on. i think there are several lessons here. one is the president ought to stop calling this violence extremism. it's much more than that.

it's jihad. and he ought to also, i think, support people -- support our armed forces in dealing with isis abroad. >> can i just clarify here, though. we don't know this is a jihadist link this could easily be, as another guest suggested to us a disgruntled employee within the school system -- >> it's possible. >> that is possible. that's as far as we know. those are the facts. >> it's possible. those caveats were played for days at san bernardino, but people who said it was terrorists were right. the white house was wrong for several days. so, if this is just a violent extremism from a disgruntled employee, fine. that shows how easy it is to

shut down a school system in our open society. but i would bet you at least 8-5 it's more than that. it is tied in with isis or some other terrorist organization, probab probably -- >> in terms of closing all schools, our nation is in a heightened sense of alert and fear given the events of the past few weeks in paris, san bernardino. is there such a thing as too much abundance of caution? where they're being too cautious, sort of fueling the fear in this nation, giving terrorists or whoever is making the threats some sort of credibility by acting in fear? >> sure, it's possible to overreact. if you -- the heart must go out to the superintendent who has to make the decision because if you don't react and a bomb goes off, children get killed, it was your fault.

this kind of call, this kind of choice is going to be coming before public officials more and more in the days to come, unless we take isis out and unless you can take isis out and defeat them here and at home. >> that would seem like -- there are many people, leerl, that would call for that. they would call for boots on the ground, but that's a much longer term strategy. i mean, the rate at which we appear to be going through these disruptions, things are getting quite serious quite quickly, in the meantime. what is the public policy response on the ground. can you make a school safe?

>> the xarm of president left with $1 million a day worth of oil for isis sitting beside the road. we are fighting this as if we are -- we are not leading from behind. we're pidling around. >> if you are in john brennan's job now, your old job, how does the susceptibility of the united states to the kinds of soft target threats that we saw in san bernardino possibly could be the case in los angeles, how does that change your job? how does that hang how you advise the president, how you interact with local law enforcement and local officials? >> well, the first approximation, the cia -- the

fbi works here at home. what you would be trying to do would be to make sure that all of the communications, all of the agents that must be in place inside a terrorist organization either in the cia or nsa in a prompt fashion provided bureau, and hose two are doing -- even parts of the fbi -- those limitations existed back before 9/11. they were ridiculous, and they've now largely been cut back. we have undercut our ability over time to deal with threats like this and to make it easy

for our intelligence agencies to provide information to local law enforcement. >> you said you lay -5 odds that this is something more than a disgruntled employee. do you actually shift, and does the american security community shift to a default assumption that almost any significant threat of this kind is linked until shown otherwise to some sort of international terrorist organization? >> i think you have to use swrmt on individual cases. this one apparently was quite serious. and covered multiple schools. an example of we have now as a result of congressional action. mr. snowden's recommendation.

the reliability for the government to keep hold of phone numbers. you can't get into that without a warrant. >> but knowing what we know -- >> what we know now about this incident, what is it that makes you more confident than not than it is more than something -- sfwlo it aids a lot more time and what other phones -- if any?

those kinds of things are harder to do as a result of these so-called congressional reforms. >> jim, thank you for calling in. really appreciate your help on this story developing. of course, we'll continue to keep you updated. that was jim wools where i, the former cia director. we are monitoring this situation live in los angeles. all public schools are closed. we're also keeping our close eye on the markets where the dow is holding its gains up 200 points as the fed kicks off a historic two-day meeting with a decision tomorrow. we'll be right back here on "squawk on the street."

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>> we have a developing situation in los angeles where all public schools are lossed due to an electronic threat, which nbc believes to have been a bomb threat to one of the school superintendents there. at least the members of the board. in the meantime, of course, we do have a fed meeting to contend with. stocks are expected to see moderaten returns over the next couple of years. amid those fed hikes, aorganized to the new cnbc fed survey, and steve liesman has more on that. back at hq. steve. >> simon, thanks very much. you're looking for modest returns over the next year or so. first, i want to show you this chart and show you how expectations for 2016 has -- have come down in various surveys we've done. back in december 14, the

expectation was for next we're to be at 2,300. that's keep coming down. not because fed rate increases something up. it's the other way around. they've brought down their expectations for economic growth. they brought down expectations for the fed. here's where they are now. looking at 2,140 versus yesterday's close of 2022. here's the expectation for next year -- i'm sorry. the year after 2017. 2,223. that's about 6%, 5.8%, and about 10%. not too bad if it happens amid a fed rate hike. take a look here at the expectation for the ten-we're. we'll do this quickly. 223 is the current level. closed yesterday. 267 for next year. that's come way down in the market here, and for 2017 our first look, just above 3%. that's where we thought we would be last year. take a look at what the expectations are for the federal reserve. how the markets have expected that. now 80% say that stocks are discounting a rate hike.

85% say bonds are discounting a rate hike. pretty much expected in there. how many rate hikes next year according to the cnbc fed survey? looking at a immediate wran of 3%, but a lot of disburgses here. 25% of our 32 respondented say they're expecting two rate hikes. 29% say 4. 23% say they expect 3. we're going to listen carefully to the guidance from the statement and from the fed chair at the press conference about what is to come after the expected rate hike tomorrow. carl. >> all right. steve liesman, thank you very much. we get guidance and dots and may even get an interest rate decision. we'll hand it to you for "squawk alley." >> joining us as always this morning, john fort and kayla. myself here at post nine. we want to get bah to that breaking news that broke an hour ago. the l.a. school system closing due to a security threat. our sharon eperson has the latest over at hq. sharon. >> yes, carl. we are looking at the nation's largest second largest school system here.