>> and we're learning yesterday that carl icon owns a stake in xerox. >> so, he kept buying ahead of the split the company announced today. make sure you join us on monday. have a great weekend everybody. it's time for "squawk on the street." ♪ good friday morning. welcome to "squawk on the street." here at the new york stock exchange, final trading day of january is here as we put this awful month to bed. premarket is solid as asia pops higher on the bank of japan introducing negative interest rates for the first time. watch the tenure here as our own gdp point 7.

and holiday sales up 22% but profit falls short. >> shares of microsoft are up after beating the street's expectations. the company recording more than $25 billion in revenue for the quarter. >> and carl icon getting three seats on the board. first up, the dow and s and, p on rise for the worst january. gdp up .7 and that comes after the surprise rate hike by the bank of japan. and the nasdaq is down 10% here today. dow is nearly 7.8% decline and s & p down. and the russell is worse 11 or so. and utilities and telecomin the green. >> it's very telling. it's just a terrible month and

you'll see numbers that are fabulous, like american airlines. four times earnings, like, i could not believe -- down to 726 million shares but then there's a virus by mosquitos that makes people not want to travel. >> just in time for the olympics this summer. >> and suddenly you have a situation where i don't care how good it is. i use that as a metaphor. apple, china, wait a second, i don't care how good it is. drug companies, i don't care how good they are. we have a house committee hearing next week. health care was a place people were hiding. there is no place to hide right now. everyone was hiding somewhere. i guess you could hide in praukter. it was good. maybe 3 m, microsoft.

but there's a list of companies that is so small that you feel it's the demageo line against the bears. no, you ride it out. you take a longer term view and you just have to, like tim cook said, this too shall pass. there are instances where you literally will have to hope the fed doesn't raise a lot because the currency is just killing people. i said an analysis that was prau prokter's analysis. it's like what it's like to do business in say argentina. other than india, these are countries that if you're doing business in russia, you're not doing business. >> not a lot going on there, perhaps. >> some expected a rate cut, they held steady last night.

>> and i keep thinking what was the peek in russia? it was when you left russia. >> it was the day after sochi. >> did you just take it with you? >> i light up a room and leave. >> it's carl, russia is pumping like mad, the rubal goes crazy. and people are really start doing a lot of business in russia and it just went away. harmon, went away. see you later. just disappeared. >> but this, to be fair, has been an extraordinary month for a number of reasons. and you mentioned health care for example. i would ad in selling by sovereign funds which you could offer is the result of the fall. and the fund management said

they lost $2 billion in out flows and others reported it was a sovereign fund pulling out and one has to wonder in this very tumultuous month that that's added a level where you're watching that come back. >> mast r limited partnerships, i want the money back. don't forget, the candidates, both frontrunners want medicare to negotiate prices with drug companies. that's $300 billion. >> are you saying bernie sanders is the leader in the democratic party? >> bernie sanders and donald trump all want medicare to negotiate. the veterans negotiate. and i think there's no chance. none. >> he was asking jason that key question.

we subsidize everybody elts in this world because we pay and we subsidize the research and development from our companies and other governments get a better deal. that doesn't seem fair. >> remember congress, a lot of mind share. remember, our country, the really cynical people will say we have the best government money can buy but you know the drug companies are very powerful. the nra and the drug companies the two most powerful lobbies. and i remember when the president said we're going to take your prophet away. it was the greatest opportunity to buy american. >> and everything you're saying explains why gold has had its best months in a year. >> i always say 10% of your money should be gold for these kinds of moments. s the there's a remarkable amount of money coming out of whole sectors we love. did you see the pricing of the

new drug, the help c drug? i mean, they're pricing it at like 40% lower. >> they're going to be down five points. >> same kind of pill and that's 30% lower than gilead. they had a monopoly on a drug costing a lot of money and it wasabout a better price by 10,000. >> and there was a lot of focus on the drug and what it's costing and at the same time it cures the disease. it's 12 weeks. >> again, i'm using these as met forical. i thought master card reported a great quarter and the visa did. i mean, they're down.

they're just doing fabulously. >> stocks will be down, we should get to amazon, which is down rather sharply. fourth quarter results were below wall street expectations and a 22% jump in revenue. so, top line was up 22%. and the company's earnings released, ceobezos said " that said, this was the best performer last year, it has suffered this year and again today in the stock market, despite that 22% top line greth and $100 billion revenue. >> the stock was up very big yesterday. look, i went over the quarter. these are conference kaulz, it's

basically kind of a -- we're basically a team that works together. you listen to amazon calls, could you break down the margin, no. i mean, how about the -- no. and then finally someone asks about original content in movies and it's like, well, let me tell you, it was suddenly there was the story. avery hastings, we're coming at you with better content. i thought the quarter was good. they say they're still not making a lot of money. they can just decide how much they make and then they don't tell you on the conference call. how are your close margins? oh. >> percentage of sales go to 12-5 from 10.9. >> they're spending a lot more money to get things to people over the holidays. >> i'm out of time.

i press a button, there's a button, tide comes to the house. never buying tide again at the store. >> nobody's arguing that the company hasn't done an extraordinary job and many would argue, the evaluation has got a little over done. but how do you go about valuing it? it doesn't eve. taking into account the third parties selling on this. so, it's more powerful -- 100 billion is what amazon is making. a lot of that is what they're taking from their sellers on the platform. >> i'm saying amazon just had 100 point swing. you understand everybody reiterated to buy amazon because they all understand the concept, which is world domination. and there are periods where your stock falls back and this is one of those periods.

world domination costs a lot of money. >> i try to take over the world every day. it take as tole. >> taking a toll on bezos today who is poorer on paper. i know. >> what is he going to switch to? >> i know. everything is going geneighborigeneighbori generic. >> and i love the kroger stuff. it's better, it tastes better but it's going to trade down. keystone, when you trade down to keystone, i mean it's a lower level than bud. >> or stroes. >> hey, remember iron city beer, tastes like coming home. this is a segway because i'm talking about the key thingia want to watch today which is tapp. >> 2.3 billion.

>> remember pioneer the secondary ended up coming back because of the price of oil. but this deal -- >> four times over subscribed. >> are you kidding me? >> no. >> how about any wealthy person all they did was buy -- >> and this is a very -- this is capital market's equity deal of the year. whatever it was. >> the beer business. kaunsilati constilation. >> and i have an $18 item i'm trying to figure out when they're bringing that down. >> tide. >> wait until the commercial. >> when we come back, xerox a big story, getting a lift after

announcing plans to split into two. wait until you hear what was said. and dow's had triple digit moves. more e*trade is all about seizing opportunity. so i'm going to take this opportunity to go off script. so if i wanna go to jersey and check out shotsy tuccerelli's portfolio, what's it to you? or i'm a scottish mason whose assets are made of stone like me heart.

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♪ microsoft is up in the premarket. and helped by improvement in the cloud and cost cutting. those are the two major themes out of this quarter. and amy hood is taking a blow torch, in their words, to costs. >> well, whatever. i mean, she's a really good cfo. amazing cloud growth, 70% growth. pulling away from ibm. 200 million devices have windows 10. they decided to give it away. and a company people forgot about and he's made it cool again. this amazon cloud business is rather remarkable. they have a giant run rate. i'm sorry, microsoft cloud. >> it's amazing how the revenue

growth in that business overall is incredible for all these companies. >> what's incredible is amazon is making big money in it, microsoft is making big money, ibm is -- trying. bing, i thought it was like bing crosby, hasn't been around a while. no, it's doing well. >> windows 10 also -- in an environment we know pc sales are -- >> much better, well above. over indexing. this shift to the anewty, i would have played it a little more. halo 5 i would have played up a little bit more given the fact that facebook played it up. but this is a home run and this is very streamline dot com like.

>> how much do you worry about amazon and microsoft undercutting each other until it hurts them. >> the gross margins are better but that's not happening now. i'm always amazed how little the surface that they scratched. >> i know, it also goes to the larger point which is to start a business, for computing power, you have to have your own server room -- >> when i started -- i remember begging -- i got a whole floor of servers here, can i get a sun? the whole floor was just computers and it cost a fortune. >> everybody use -- microsoft or one of the services. >> you save a fortune on rent. your biggest cost is power. >> power. yeah. >> it's incredible.

when david and i were taking over the world, we realized we didn't need as much real estate. i said, oh, my god, what is this room? it's just fill would boxes. my air conditioning bill was -- mine, the company's -- no, mine. >> and xerox confirming the plans to split in two. one legacy hardware and the other will receive three seats on the board. and he ups his take. take a listen. >> we're happy that he is in support of it. but he had nothing to do with the initiation, the contemplation, the analysis or any discussion around the deal. it is good and happy. we're happy that he is in agreement with it but he did not drive it as is being reported in the news. >> of course, it comes after

four years of declining profit end sales. >> and a deal that she championed. having taken the helm and this was a large deal for xerox and essentially is the services business that will now be split off from the company under the leadership still of ms. burns. icon and icahn came calling and they said no and nine months later they said yes to a split. and of course he's going to be on the board or have three board seats on the services company but the question is will it really create value from here for xerox which has had a rough

go of it? >> i think one, it will create value in one part, which is the services business, which i want. i don't want the hardware. i don't think this creates much value at all. she had told you repeatedly it was a home run to have the companies together. not unlike timcon and if you look at what happened there, the company is destroyed. i want them to make it but you needed to have the two businesses together to go through hard times. they'll make it because they're a great company but the stocks have been -- and i think when xerox splits, they'll be like i don't want the hardware but it worked and they break it up -- >> raises eyebrows. >> curious.

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they had even better than honey well. and dave cody, the ceo delivers again. and i'm sure at one point -- this stock trades wildly and in this very tough environment, some of these american companies are doing well. >> boeing, not so well. >> and thank you for mentioning this. boeing, it's a little zero sum. it debased the euro so much that it makes much more sense to go buy an air bus. and you're going to see this new engine that united facilities just built and you have to buy boeing planes in dollars, they won't take euros. and every time you see he bashes the euro, that's another sale. boom, boom, another angel gets

its wings. it's a wonderful like for europe. bad for america. >> we have a lot of stocks that we haven't gotten to but we will get to. >> okay, very good.

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♪ you're watching cnbc "squawk on the street." the opening bell in about a minute as we put the month of january to bed finally. chevron with an earnings report out, just got clobbered. >> waiting for that call but i have to tell you production quotes still up. they're cutting back dramatically. so, you could see why people feel oil should go higher because when you see chevron's budget and budget cuts, you say, wow. i have to congratulate chevron through this period. so they bought a lot of stock back and as it goes lower, they stop. and chevron has done a very good job and my hat is off to them.

>> are you a buyer of this notion that we're going to see the coilation between oil and stocks change? >> only because i saw a change in china. we haven't cared about china in eight days. i think there's a sense -- look, the cutbacks are so big that it it is going to bottom and perhaps people recognize it's supply and not demand. it's not tin, copper, i've just look at the oil market and i say, look, the glut that came from the united states, thank you for the natural gas liquids that have come out. we over produced and we have not needed what we produced. and the saudis won. in the end, they won.

>> a provider of title insurance and real estate insurance services. it's dedicated to end relationship violence. and chevron, exxon are the ones in the red for the most part. >> when i say chevron is good, it has fallen far less. exxon has fallen far less and it doesn't mean that people should have got this excited about the stocks. i think it says i can't believe how much oil chevron can put out, given the cuts they're making. and they -- the volume doesn't go down, it goes up because the technology is so amazing. the technology we have in this industry is every bit as good as the drug industry. it's really amazing how good we are. >> it may be often over looked that it's technological break

throughs that led to oil and economy. when did we first start fracking? in the '90s. >> and north dakota is now expensive crude, even though it's clean. >> it's a combination of so many things. >> when you go to an oil rig, it's really kind of amazing because they bend the pipe and it makes a right and a left. and they just get everything that's in the zone but all that said, the saudis want this stopped. they want our industry wiped out and initially they said they can't do that. but yes, they can. and now all the other countries are cutting back so severely that you can get an eke wulibrium here 2015-2016, still not going to be down that much

in the united states but 2017 -- if you're -- i asked american why don't you go buy a natural gas company. they don't want the up and down. but if i were a utility, i would go buy one of these down and out natural gas companies. >> the journal uses eog. >> you know there's bargains there but everyone is waiting for the shoe to fall because that would indicate you could get a chance to buy it through reorganization. >> i don't think the name is just there. >> certainly we know some you have to keep a closer eye on the debt than the stock price. >> i know james in the street have put together a stress index and i think it's safe to say

that free port, maybe a little less stres. chesapeake will stretch. free port does have 20 billion in debt. you look at eog. they have this fabulously low price for oil. now above where they did that gigantic secondary. so, it's influx but ana darko is such a bargain for someone and not going under, by the way. if i were exxon i would be kicking the tires. >> they made that weird move on apache, didn't they last year? >> it didn't happen. but they're great. there are bargains but obviously the issue is if the saudis want to keep playing this game, what doio ado? i don't know. they're just unbelievable. chevron ramped up production adding to the global supply. remember, the gulf of mexico.

if we were to go down there, there's so much -- i have to keep mentioning that because that's why the united states won't be down a fraction because of the technology and gulf of mexico. >> amazon, 9 to 10%. microsoft, you don't see a 4% move on microsoft that often. >> you know, sometimes -- amy hood is just fantastic and she's the cfo and they just -- i go back and forth with the guys at microsoft, who happen to be, by the way, fabulous people. and x box live 48 million. it's nothing. i mean, but that's fabulous. look at electronic arts. they're underindexing. i'm just saying within microsoft there's so much and he's a loved

figure. >> loved, really? >> loved. >> by whom? >> everyone. everyone who meets him. charmi charming, smart, cool. >> coming soon to cnbc. >> it's america's most watched network. i would do ncis sacha. >> tom cruise was in that movie. yeah. i can't emphasize enough their cloud growth is insanely quick and this intelligent cloud where they do what ibm wants to do, they're doing it and their whole strategy with windows 10 turned out to be brilliant. pc tablets did much better than the rest of the industry. netflix, pandora, uber, they're all using apps on windows.

what i'm saying is microsoft got cool. you don't believe me? they're cool. >> i'll tell you facebook is still pretty cool. >> they're mega cool. >> $110 a share. closing in on its 52-week high. or all time high, i guess. >> i want to emphasize that people on twitter, i'm not making this stuff up. you have to listen on the calls. are they tedious, tiresome? i mean, your -- >> it's a lot of calls. >> but the calls are the fundament. let's analogize to sports. the calls are tape. tape, tape. the calls are tape. you can't get into that super bowl without watching tape. you need to watch the tape. you think that ron rivera, you

think they're not watching tape right now. you think von miller is not watching every miller? >> no, he should be. that's his job. >> and it will pay off, trust me. >> watching tape is the same as a conference call. >> i forget he's a denver fan. we're always lucky. >> hinkly is watching tape. be careful. coleman is a tape watcher. actually, your defense is so good -- >> here's a name we don't often hear. i took a chance to read a bit of black stone's conference call. they're up. tony jameson and schwartzman, they are big sellers. they don't sell anything of the stock, they promote it on that call. >> they're great promoters. >> wow are they showman, yes. >> the article is very positive. i didn't do the call but they have a lot of fire power.

>> they were talking about stock being over 100 bucks in four years and four different scenarios in how they get that one. i'll ad that one. blackstone call. >> some people are reacting to it. but i'm kind of amazes at some of these american companies. like, how did they do that really great number with the strong dollar inyo? you're seeing unbelievable companies do great things and they're so handicap because they're american. >> that's true. dow has gone positive for the week. morning, don. >> morning carl. so, last trading day of the month. and what a month it's been so far. you have hit a lot of the stories on a company basis but let's take you through the early sector action. we do see at least a mixed picture. it's nice to see technology

leading the pack. and some have been positive, others not so much. utilities doing their part as well. they've been one of the big winners in the month of january. energy and consumer discretionary among stocks not participating as much. retail being down so far this trading session early on. if you take a look at the company's stories, the ones traders will be focusing on, seagate, microsoft, chevron, gilead, amazon. and obviously been have a huge focus. and always going to be a focus here. it was funny because i was speaking to one trader, hey, what's going to happen with the market and he says to me, where's oil going? so that's still the sentiment for a lot of these guys out

here. the s & p 500 still off by 8% over the last month here and if you take a look at the internals of what's moving and gyrating through that. on the sector side, this is the reason why some people are not as happy with what's going on with the market. telecomm and utilities leading so far this year in the 500. and financials worse off than energy. even going into the next couple of weeks, is oil and gas the only story? maybe not. dominic shu here. and hey, rick. >> yeah, yeah, 30 years the japanese are trying to test tubes. they're putting ien stein's

saying to the absolute test. let's look at a two day of 10s moving on. and one day of 10s. we're now comping back to the spring. we're approaching 30 basis points. a one year of bunds maybe gives you perspective. we settle at 07. but we'll continue because recalibrating stimulus is fundable everywhere and currency wars are also very explosive. if we look at a two-day, 10 basis points. look at a 20 year chart to see the last time we were here. basically never. and ayear ago the euro versus the dollar, you can see it hasn't done all that much. but here's the chart to look at euro to yen, it's at 131.

year to date of the pound versus yen, you can see it's moving very aggressively as well. what do you think the response with the german export economy and the u.k. trying to get their footing, this is going to create a spiral. >> we're going to see you in a few minutes for pmi. wevent got your take, really whether it boxes in the fed somehow? >> the fed doesn't seem to care what these kurcurrencies do. they're -- gary saying a fantastic panel that bloomberg put together saying the fed is looking at this thing, analyzing the digital world and i have a

toyota factory near my place in new mexico and it's very hard to compete when you have this yen. they're just killing. >> in terms of negative rates and what they're buying in assets is also staggering. >> there is some debate going on. >> you have to go do something. don't you have to do something other than just have cash? you lose money when you have cash, right? >> that's what they're trying to make sure people do but you're talking about an economy that hasn't done anything. they need more people. >> demographically, it's a tough one. >> that's just a recognition that the other guys want your share. saudis take our share in oil. the japanese take our share in

europe in cars and i'm not being a zen foeb. i'm just saying it's happening. it's not like they say we withsy the weakness in our companies and there will always be an out liar. if you do everything right, sure. but toyota stock should be higher. thisota and bad for ford. >> rick. >> reporter: we're expecting 45, we get 55. 55.6. part of me wants to celebrate, part of me is really scratching my head. so, this comes off the worst level since 2009 and now the highest level going all the way back to the january of last year. so, we'll call it one year precisely. it doesn't really fit with the

context of the series and other isms. but none tthelesnonetheless, 55. if you're scratching your head, contemplate. >> i'm scratching my head. >> when we come back, we're going to talk tech investing. microsoft and amazon two of his top three holdings.

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she could control her cash flow, and keep the ranch running. chase for business. so you can own it. welcome back. there hasn't been much -- it's worth focusing on the fact that molson coors raising 2.3 billion ther . that may be the largest equity

offering this year. i'll leave it to some of the people who perform the statistical analysis to tell me if tats ahat's the case and tha for the miller-coors partnership that sab is getting rid of as it prepares to be acquired by anheuser-busch. and important to note and the stock is holding 88.60. >> that's incredible. and the pressure in this market. and look at kaungs kaunsilation. i do it every night and not because we drink a lot. >> and all of these deals not

going to close until september but you raise the money now p. and the deal itself to buy them out is not going to conclude until the deal. >> the cleanse ends february 1. i have antan't had a beer since september 23rd. i'm just in there buying back shares left and right, maybe i'll start with a corona and maybe i try a bud. i havant had a cement head in years. >> got all time highs on mcdonald's and facebook, back in a minute. here at td ameritrade, they work hard. wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart

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time for cramer and stuff trading. >> you never get a word from apple. remember, the wireless technology is a terrific company. i was talking about during the break, look at these companies that have done incredible things. we have amazing numbers frumnt

united technologies, 3 m. the johnson and johnson. a lot of these very big cap stocks and almost curious it was so good. i think a lot of it is auto. and out of health care, into great technology. and those are all because of a -- apple was considered to be not building as much. all i can say is the week is ending right now on a very good note. >> even qualcom up. >> i mean, that stock could not get ahead of itself. >> what's on "mad" tonight? >> we have brunswick, it has been killed. and farooq.

he fought them off. what do you think about that? >> what do you think about that? >> it's doing fine. geez, maybe oil goes up and china positive. i feel, you know, a little love. >> a good start. >> end of the month love cept for electronic arts. >> we'll see you tonight. when we come back, talking amazon and microsoft in a moment. er for

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♪ good friday morning, welcome back to "squawk on the street." simon hobs is off today. whether it's this pmi surprise to the upside, whether it's bank of japan going negative interest rates. oil cooperating in the dow. >> and we have breaking news on consumer sentiment. how does it look? >> we're expecting the final

read for january. we're looking for a number probably close to 93 but it can go anywhere. remember, 93.3 was the dangling midmonth we're going to toss out. final comp will be to december which was 92.6 and it must be snowing somewhere because i don't see the data yet. any second and here we go. 92.0. 92.0 takes us back to a comp of november when it was 9.3. now, i would like to see all our smart viewers and listeners recog nile 92 on michigan. sarah, back to you. >> little bit of a contrast there. thank you. bank of japan making the surprise move to negative interest rates. does this take the interest rate hike from the fed off the table? let's bring in global investor ceo and joining us from hq as

well. now that you've had time to dig through this morning's gdp report, is there anything you can point to that shows us what's going happen during the first three months of 2016 and if we can expect a bounce back? >> it's something the economists are puzzling over this morning . the consumer came in at 2.2%. definite slow down but held up reasonably well. you can see ethe whole gdp number rose by 07. so, that's something where -- you look at this number and it's well for investors to recognize, all the pain and blood on the street is not necessarily being felt by the average american. this consumer sentiment holding up to 92 but the consumer spending number in the fourth

quarter suggests there's not a huge impact so far of what's happening in the dow and the sense of i guess apocalypse, which is baked into the stock price numbers these days p. >> i would take that as a good thing, jim. now that we're looking that last day of what was that brutal month for the bulls on wall street, do you buy? have we seen the worst of it? >> today's probably not the best day to buy because -- i think the economy in the u.s. will grow 1 to 2% this year in 2016 and i think that's actually a pretty benign environment for stocks and bonds. the market has a high degree of volatility, partly because of withdrawal from capital from

trading. there are just no shock absorbers in the market anymore. multiple trading venus, it's all creating extra volatility, so the market over reacts on the down side and over reacts, arguably, on the up side. this is an opportunity for the rational investor to average and stay rational and make better long-term numbers. >> allei mention the bank of ja. where do you come down that it's a good thing to see global easing and easing from abroad? >> you knew i wouldn't comment whether it's a good or bad thing but what i will say is it does changing the game for the u.s. and i'm interested. jim was talking about it being a different game out there. i think it's going to be almost impossible for the federal reserve to move in march. i think this was a bigger shock for them as it was for investors, even in japan who

were surprised by this move. you now have two of the three biggest central banks in the world at negative nrtdest rates. never happened before. the united states is tighter now than it was before, so i don't think they're going to be in a place where they want to raise that or increase the distance between them and the two biggest other banks in the world and if you look at for example the december fed fund futures is they're barely pricing in at a 54 basis yield there. the had market now just barely at one and i expect a more dubbish fed. >> interesting. would you agree with that? you th >> completely agree with that. i've never believed the plot of three or four rate increases

this year. i think the whole economic establishment is underestimating the impact of technology on the economy. we have chieper manufacturing, cheaper commodities and that's technologically driven. so, i think you're going to see a period of low growth but deflation, which is not bad for prosperity. as soon as the feds started tapering long time ago, it became obvious that international central banks would have to do more to create liquidity. steve's talked about the boj move. i'd also point out the pvoc in china has increased liquidity. i think this is all pointing to the fact that other central banks are finally getong the program that they have to create the liquidity that the fed no longer needs to do for the u.s. economy. >> i think it's worth while to point out that the message to

the market is that you have the neutral rate wrong. you're too high and the market is screaming to central bankers, the real neutral rate for the global economy is lower than they think and i don't want to speak heresy but it might be a negative neutral rate out there. >> we certainly could. and i think if it's negative real, the fed statement this week talked about still trending towards 2% inflation. i think fundamentally there's so many antiinflationary, international currency moves pointing towards lower inflation. so, i'd be with you, steve. i think neutral rate is probably marginally positive. and i could see in a year's time 55 basis points. that could mean a 10-year yield

of 150 even. we're in this lower for longer environment. >> let's talk about the strategy for u.s. investors. we're seeing a nice broad rally with all sectors higher, technology and industrials are in the lead. and now we have lower evaluations. where are you looking for bargains? >> there's a bit more tail risk here because undoubtedly with the way the credit cycle is moving, particularly in brazil and china, global growth will be lower than we expected two months ago. so, i would say stick to u.s. earnings, small and midcaps should be pretty good looking forward because the u.s. is going to be the global leader on growth and i believe it remains a buy onsetbacks market. that's going toi be the way to make money in the equity market.

and don't dessert bonds. people talked about 10, three 4, 5% yields. they may be underpriced at the moment. it may be that high yield and investment grade credit are pretty attractive unless the tail risk in the u.s. comes true . >> thank you for the good conversation with the dow up 200 points. mean time, republican presidential candidates faced off in iowa without donald trump who hosted his own event to raise money for u.s. veterans. and here with all the details on the elephant not in the room. i love how they put that, john. >> reporter: it was a bazar night because you had a republican debate, the last one before the iowa caucuses, that not only didn't have the leading

candidate, but you have him trying to actively undermine the debate. and that made for awkwardness that ted cruz tried to break in the beginning. >> let me say i'm a maniac. and everyone on this stage is stupid, fat and ugly. and ben, you're a terrible surgeon. now that we've gotten the donald trump portion out of the way. >> reporter: now the joke was in part on ted cruz because that put the target on his back, the fact that donald trump wasn't there. he was targeted by fox moderators with a video montage suggesting he flipped on imgrash imgrasi immigration and so did marco rubio. they both ran for the senate promising to oppose what they called amnesty. here's ted cruz with that accusation. >> we both made the identical promises but when we came to

washington, we made a different choice. marco chose to support amnesty because he thought it was -- >> reporter: now, marco rubio got the same charge from jeb bush who has been closely align would rubio's position. that made the a difficult evening for rubio. >> it's interesting jeb mentions the book, that's the book you changed your stance on immigration. >> so did you, marco. >> reporter: jeb bush had a very good night, so did rand paul, but unfortunately they're lag way behind in the contest. donald trump has a lead in the iowa polls in the last survey we've seen and he's poised if he wins here to do well in new hampshire and beyond, so it was a good night for donald trump and interestingly when local news covered the eevent after

the event for veterans and debate was over, the lead story wasn't the debate, it was donald trump. >> thank you. when we come back, two big tech stocks trading in two very opposite directions. microsoft gets a boost from the cloud. we'll find out how he should play these names when squawk on the street continues. big plans. so when i found out medicare doesn't pay all my medical expenses, i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest is up to you. call now and find out about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, it could save you in out-of-pocket medical costs. call now to request your free decision guide. i've been with my doctor for 12 years.

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seattle tech stocks moving in opposite directions this morning. amazon posting a drop despite a higher profit than ever. walter price is senior tech portfolio manager where microsoft and amazon are two of his top holdings. good morning. let's tackle amazon first. is the concern that they're behind the curve on shipping costs? why the disappointment? >> i think they basically had too much of a good thing in this christmas quarter. not only did they get very good orders for their own business but they got very good orders for their third party business and i think they basically decided to absorb the higher cost to keep the customer happy and that's why the earnings were

disappointing. >> so the sentiment surrounding the stock today is this a short term problem or long lasting? >> i think people want to see amazon continue to make progress on the margin front and margins were higher than last year but i think after two very large beats or three very large beats, people were a little too optimistic about margin progress in this quarter. and certainly their aws business is going gangbusters. i think this is a small setback but not a reason to dump the stock. i think the long-term outlook continues to be very good for amazon. >> looks like it's already the top holding in your portfolio. are you adding? >> what we did going into this report is we cutback amazon a

little bit and we're not ready to buy back that position yet but i think if you didn't own the stock, it's already one of our largest holdings. if i didn't own it, i would definitely buy it today. and microsoft surprising everybody. our own jim cramer saying they've made a company cool again, whether it's cloud or cost cutting or bing. how much do you think this is truly appreciated right now boy by the street? >> i think a lot of people think it's not a relevant company, that pcs are dead and therefore, microsoft is in trouble. what they're showing is that if you get people to move to your cloud and you get people to move to office 365, it opens the door to selling other prodx and what they talked about on the

conference call was their ability to upsell these customers now that they're engaged again. i think this is a long-term secular change for microsoft. >> since you like the stock, how do you justify the valuation. we know we can't do the traditional pe map, so how do you explain what numbers you look at to value that company? >> well, the way we look at amazon is basically in two pieces. we think the retail business we value on a market capita sales, looking atul other retailers an we think that's worth several hundred billion dollars p. including their third party business that they're providing logistics for. so we think that's worth somewhere around $200 billion and we look at aws.

this is $10 billion run rate. very good margins. 70% growth rate. we think the secular growth rate is somewhere between 40 and 50% over the next five years. we think it will eventually be worth another $250 billion. eventually, if you take a three-year time horizon, you can see amazon being worth about $500 billion. >> 250 billion for aws. that's based on a 25 multiple to annualized revenues right now, correct? >> well, we think it will will be a $50 billion business in about it four years, so at that run rate, you're talking five times revenues and that's how we get the 250 billion. it's not something you're going to see next year or the following year but if you look out to 2020. >> we remember when kweting to

10 was a very big deal. if you had to characterize the leaders in that chase for the cloud, whether it's crm or amazon or microsoft, is it clear to you that amazon has the lead? >> well, yeah it's very clear to us. and i think the interesting thing about technology is that users gravitate towards the leader. so, the leader tends to gain share over time and amazon is winning 70 to 80% of the competitions. and their offering is getting stronger and broader. so, we think it's a juggernaut. >> certainly not with standing the decline today, people would probably agree. thanks for the site. walter price. >> thank you, carl. when we come back on "squawk on the street." douglas holts-eakin weighs in.

the dow is up 220. we'll be right back.

. rick all fired up today. >> i am all fired up today. thank you, sarah. welcome doug holtz-eaken. i'm glad you're with us on this very strange day. first quarter .6, third quarter, 3.9. do a little sieferring, that's a 2015 of 1.8. comment on that, sir? >> you know, this report was roughly what i expected. everyone knew it would be weak on net exports, inventory. i was a little disappointed in the consumer but in the big picture it's just more of the same. we've been grinding along at something that looks like 2.3 with a quarter going up, a quarter going up.

>> let me ask you a question, if you owned a giant warehouse and across the street was a giant warehouse and you were selling giant furniture, if the first two were slashing by 50%, what do you do? >> you have to slash. >> so, why do think bankers think less growth everywhere that lower rates, why is that going to stop the process of deleveraging and getting rid of basically global inventory from oil to commodities, name it? why is that a good way to go? >> i was very surprise bood id report. instantly you get lower yen but

japan's got larger globally competitive export sector. rits prit's problem is the rest economy. and we've seen this elsewhere. we did extraordinary monetary policy in the u.s., europe, japan. nowhere has it spurred growth. it's fine for stopping a financial fall but it doesn't push growth. and that means competitive industries, deregulation, low taxes. it's an old recipe, just not being done. >> you're going from a furniture warehouse owner to a owner of a bank in japan. >> i quit. >> you're going to have a penalty of 10 basis points. my question is who exactly are you going to lend to? more entities that have nonperforming loans for how long? >> for 20 years i've been giving

money to the same nonperforming entities and we'll have one more time a really inefficient alication of capital. and they'll waist the savings they kim plain thcomplain they h of and it will be more of the same. >> now you're a part time central banker. you see the yen depreciating, you see your own currency appreciating, whether it's the pound or euro. what is your next move going to be? >> some are going to be very tempted to get into currency war and try to fight for export shares. i think that's a mistake. i think you ought to be looking solely on your domestic economy. what's the pace of inflation, growth.

you'll get the impacts of the it international sector for sure. in our case, i think the feds should have a rate increase on the table in march. >> they should have went 50 or 75 a long time ago. now, really, listen, i think the same as you but they're most likely not going to raise rates. negative rates or our cash is right and we're going to go back to the future for less growth down the road. wonderful. doug, thank you. carl, back to you. >> thank you very much. rick in chicago. straight ahead, chevron posting its first loss since 2002. what should you do with the big oil names?

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good morning everybody. malaysia officials investigating wreckage that washed up on shore earlier this week. prompting investigation that it may be from missing flight malaysia 370. and north korea has resumed propaganda broadcast across its

border. japan restarting a nuclear reactor that uses plutonium based fuel. it's the first to come online since the nuke sheemau disaster. and nissan recalling nearly 930,000 altima cars world wide for a latch problem that could allow the hood to fly open while it's moving. you're up to date. sarah, back to you. >> thank cryou very much. and watching shares of chevron as oil prices continue to fall. they're off the high tofz day and chevron highs are off the

lows of the day. and one of the questions for this company is how safe is the d d divdnd? >> they're currently funding dividends through additional borrowing. you can't do that forever. the current low oil prices, no company is earning the dividend and the annual is 8 1/2 billion a year and that's after tax. if oil prices stay at the current level, it will be at risk, not just for chevron but for the industry. >> so you do expect chevron to cut their dividend as long as we stay at these levels? >> yes. >> that would come as a big negative surprise. would that be a washout

momentallau crisis when citi group cut. >> as i said dividend is going to be the last thing the company will touch. it's a sacred cow but if oil prices remain at the current level, the company will continue have a negative cash flow which means the dividend will be funded entirely from additional borrowing. and most of it because of the dividend. >> we've had other examples and other commodities where a dividend has gotten cut and they worry that the balance sheet is more manageable. would it trade down if that happened? >> so far most of the companies that cut the dividend, the news was received very positively by share holders. we cannot hide it. the fact of the matter, we are

paying the dividend through additional borrowing. most investors would like to bite the bullet and just realize that we just cannot do that forever. at some point, you have to say i have a choice, either to cannibalize what i have in operation and pay dividend or i would say the money i'm paying in the form of dividend to reinvest in my core business. >> we're just watching the price of oil, tick for tick as we do and we're losing some of the gains. wti now going back. there were headlines that iran played down the idea of an opec cut. it announced the number of barrels it's putting out on the market. do you buy this idea that opec and non-opec numbers are going to cut or is it speculation?

>> yv wi've been in the busines long enough to know not to rule out anything but you have opec to be on the same wave length with russia which is equally in the same bad shape and other large producers. i still believe oil prices are here for a reason and that's why saudi arabia is pushing more and more to achieve its objective and i don't think they have yet achieved these objectives and most likely that oil prices will remain lower than many expect. the objective is number one to curtail production in the u.s. this is the number one issue they have. they have dismissed shell as a serious player in the business but shell production is 4 and half million barrels a day.

that is u.s. share production. that is double the production of kuwa kuwait. so, they have earned their seat or have to earn their seat at the table and you cannot have u.s. share producer going along with whatever opec does. they need to cut production by a minimum of 5% across the board in order for them to get supply and demand in line. and if so, oil prices could be up 50%. >> not happening just yet. chevron was the first of the big u.s. oil companies to report. it looked worse than expected. does this bode poorly for some of the other energy players over the next few weeks? are you with us? looks like we lost him. chevron shares heading back south again as oils gains slip

away. quite a prediction he made on chevron that they're not going to be able to maintain their dividend with shares at these levels. >> and meanwhile, there's a lot of concern over the zika virus increasing. as many as 4 million people could be infected booy the end the year in north and south america. >> reporter: those symptoms are generally mild. the risk over pregnant women may extend to central and south america. babies are born with smaller heads and less developed brains. researchers are trying understand the link and meanwhile, the cdc has advised pregnant women to restrict travel to these areas.

and it hasn't seen a material change in flight bookings because of the virus, at least so far. but spring vacation season is coming up. and that could be weighing on airline stocks. another group with exposure to the area is of course cruise lines. they say investor concern can weigh on sector sentiment. and carnival, it accounts for about 1/3 of their passengers. and they're off to a tough start of the year. all eyes will be on brazil where preparations are underway for the olympics in rio de janeiro. and we'll look at how they're fighting the mosquitos. that will be interesting. stay tuned for that p. >> that is going to be a question. up next, boeing one of the worst

performers on the dow industrial average this year, will the company of the most popular plane turn things around. the ceo will be here to talk live when "squawk on the street" comes right back.

you can fly across welcome town in minutes16, or across the globe in under an hour. whole communities are living on mars and solar satellites provide earth with unlimited clean power. in less than a century, boeing took the world from seaplanes to space planes, across the universe and beyond. and if you thought that was amazing, you just wait. ♪ welcome back to "squawk on the street." oil prices coming off on session highs that iran would not join immediate opec production cuts and saying iran sees no reason for an emergency opec meeting unless there's consensus and the

russia saying they're ready to cut production if there was cooperation. and getting everybody on the same page is difficult, especially as the iranians are just getting their oil out to market a at this point. and we're coming off a little bit but this is a typical countertrend that we would expect to see blips like this, short covering, the dip action. >> all right, thanks very much. here at post six where bowinein trade. and shares are down 18%. at the bottom of the dow and today their big bet on the next generation plane, the next gen of its most popular plane is taking off for the first time as the company tries to ramp up

production. and live in renton, washington with more on that story. >> we're joined by ray conor, ce,c ceo of boeing air planes. >> i mean, this is the future for us. in terms of this will be our very first airplane in our second century we're going to do and the 737 is kind of the core of our airplane production. >> your shares were hammered in part because of how many commercial airplanes you will deliver this year? >> well, i mean, i don't know if it was a miscommunication, maybe misunderstanding with the analysts and such. we're running our 737 at 42 a month and then we're bringing in

the 747 max and then we'll build a number of airplanes that are max at the same time and once we take the max into the flight test, we'll continue to deliver the nt's but not as many because we're going to have the max being built at the same time and they can't deliver until they're certified. >> but should wall street have known that? >> we tried to explain without giving exact numbers but we did explain the process we go through. >> richard anderson has been clear in saying there's a bubble, if you will, in wide body aircraft in the world right now. is that weighing on demand for the 787? we know the 747-8, you're cutting production, is that weighing on wide body demand? >> we're to take the rate up. we're going to 12 a month.

we're at the highest production rate ever for a wide body airplane in the history of commercial aircraft and now we're going to take it to 12 a month, a new record. so, the demand is there. we're taking the 777 down to 7 but that's -- >> so, you don't believe there's a bubble? >> there may be a stablization but the demand is there and we're going to keep delivering these airplanes. >> iran ordered 110 aircraft with air bus. a lot of what they're flying are old boeing planes. do you possibly have an order at some point down the road? >> we're following the process that's been laid out and we're going to stick to that process. we're flying for our licenses now and doing those things so, we're moving down that way but we haven't been given the

clearance to sell airplanes to them yet. >> and so much concern that the chinese economy is slowing down. >> we were in china last week and i can tell you the growth is still there. 11% traffic growth last year. they're increasing their arm airports. 20% more over the next four years. there's a lot of demand in china. >> and they continue to build new airports. >> up to 240 airports. they're going to move from 180. so, 60 more airports. >> over the next four years? >> something like that. >> ceo boeing commercial airplanes. first bird. we're going out to the line right now right? >> and wear your coat. >> it's in the next hour, hour 1/2, depending on weather. >> looks like fun.

at the boeing factory. when we come back, fashion designer weighing on the future of retail and his new line with brooks brothers. we'll be right back. there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be.

200 point gain for the dow makes this the best week for the dow this year. it's since last august. let's get to seema mody for a market flash. >> global markets may be cheering the negative interest rate decision but japanese banks have not joined the rally. take a look. all closing lower. negative interest rates means lenders will now be charged 0.1% on new deposits to encourage commercial banks to lend. it would hurt japan's lending environment and profitability after these japanese banks. >> seema, thank you. >> fashion designer zach posen is known for his collaboration. now he's teaming one brooks brothers. on a brand new women's line. came by to talk to me about the

new project but i started by asking him about the troubled state of retail right now. >> right now there's too many brands. >> the luxury retailers don't have a space for it. they're transitioning into real estate holdings. and the real estate itself is more valuable than what they're going to make on selling it. it's a different playing field and they're all going toward e-commerce. i'm launching my e-commerce in a couple of weeks. my secondary line, sunglasses, that is very exciting. >> talking about the retail pain i'm curious what your thoughts are on department stores. are they dying? >> are department stores dying? no. and i'll tell you why. a consumer experience is so important. it is a form of entertainment. i call it all fashiontainment. it now needs to be taken into

the scores. >> the macy's and dillards of the world need to freshen up. >> we have these incredible real estate placements. now let's get the tourists and let's sell other items beyond the high price points. i think macy's has done a good job. it will continue. i'm sure that they're looking at other ways to make it a continuous christmas. >> how do you deliver something for the mass market american woman? that is a pretty broad group. >> i think the mass market is redefining itself. i think mass market for the consumer has become fast fashion. we're a little bit above that. we're not designer. we're not, you know, what they would call contemporary. through volume, through relationships. we're a privately owned company. you know, the owner has -- >> italian billionaire. >> italian, amazing successful business family so they have great resources and business connections with some of the

greatest fabric mills in the world. we get incredible fabric. nowhere else. i'm a retail nerd and nowhere else can you get such high quality fabrications at such a good price. >> and finally what other brands you admire right now. especially if there's any other public companies. we talk about coach and kate spade. they're trying to come back from hyper growth phases and reestablish themselves. >> we're in a stabilizing moment. let's get it stabilize. to me the next frontier from the large brands is that they have to become media companies themselves. that's my crystal ball about the public companies in my world is that -- and even, you know, as the department stores become entertainment the brands themselves need to create the content. >> zach posen, designer, business man and i would say forward looking thinker about some of these issues.

he clearly has some pretty strong opinions about the state of retail and the state of public companies. he checked the nikkei every night before he goes to bed. and this idea that these brands have to operate more as media companies and that department stores have to operate as more -- as i don't remember the term he used, fashion experiences sort of. reminded me of pesi. there's a story in new york times that they're getting into the restaurant business. opening up an upscale meat packing restaurant. you have experience and retail and consumers starting to emerge. >> i was interested in what you said about moving to e-commerce. there's a smart piece about the investment it takes in labor and technology to sell things, just the supply chain complexities means the margins are thinner. you get additional sales but the margins are thinner. >> that's what he said. >> that's what he means by content for a fashion company. i'd be curious to see what that

actually looks like. >> i think what he's talking about is being more snappy -- he does project run way the show and getting more involved editorially and establishing an audience and talked a lot about using social media as a tool. he doesn't allow pinterest in his studio. he doesn't want people to copy other designs. it's not just putting out a line on the runway and he also said a lot of the european fashion designers weren't really up to speed when it comes to e-commerce. they haven't moved fast enough. >> let's send it over now for a look at what's coming up next on squawk alley. >> we got a lot to talk about. >> if you take a look at the stock you can guess what happened. investors didn't particularly like but was the quarter that bad? we'll dig into that microsoft up sharply what do investors like about that one? we'll dig into that as well and the creator of g-mail is going to join us. what does he have his eye on now

for what's next and hot in tech? all that and more coming up next on squawk alley. sometimes they . cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

can a a subconscious. mind? a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit? can a business have a soul? can a business be...alive? good morning, it is 8:00 a.m. at amazon headquaters in seattle washington. 11:00 a.m. on wall street and squawk alley is live.

♪ welcome to squawk alley for a friday morning. kara swisher, executive editor of recode is in washington. good morning to you. a quick check on the markets here. dow is up 192. the best week so far of the year for the dow a lot of that thanks to the boj going with negative interest rates. chicago pmi was good. japan surprise move as the dollar moving against the end we'll watch all of that. then amazon hit hard after earnings missed