live from new york where business never sleeps, this is "squawk box." ♪ under pressure >> good morning and welcome to "squawk box". joe and becky are off today. traders this morning are waking up to a global market selloff. u.s. equity futures at this hour have recovered, but that's not saying much. the dow by 251 points. a selloff has been the mark of the new year. it's sparked by comments by janet yellen yesterday acknowledging a slow down in the global economy, but she said it's unlikely the fed would cut rates having just raised them. even so, potentially rates was enough to spook the markets in the u.s. and in europe. the nikkei was closed.

but the hang seng and kospi reopened after the lunar new year holiday. south korea down 3%. shanghai remains closed until the end of the week. meanwhile, the dollar falling below 112 yen for the first time since late 2014. the level of the dollar and the spread between interest rates, the -- >> did you see the ten year? it's 162. >> hard to believe that we are back there. >> it's sliding by tremendous amounts, by the day. i mean, it was at, i don't know, it's like ten basis points lower today than it was yesterday on this prospect of negative rates. >> do you really think that she was going to satisfy on the markets yesterday? >> no. >> going into it -- >> she was never going to get what people fully wanted. no way. there were some people who

wanted her to completely capitulate and walk back from the move in december. not only did she not do that, she said we have no plans to cut rates again. >> but there's also nothing that she could have said to asewage the market. she could have said we'll do more qe and the market would have said qe makes central banks less effective. she would say she's asleep. there's nothing she could have said. >> there was no way to satisfy. >> apparently not. >> it was an impossible tack. >> although she has another day. we'll see what she says. >> today. >> there's little that she could say that would bring relief -- >> do you think she goes home at night and says i'll turn it around tomorrow. >> i'll tend them f-- send them ride tomorrow. >> china remains a huge concern. you have kyle bass, the investor putting out an investor letter i think it was yesterday, which talks about chinese bank losses

being five times as large as the u.s. subprime losses during the crisis here. then european banks resuming their selling as some continue to worry over what socgen, some of the comments its ceo made, the deutsch bank, bond buyback. >> or lack thereof. there was, on "worldwide exchange", they were talking about deutsch bank with 1.3 trillion euros. >> deutsch bank is the one that's always been sort of out there. can we be honest? people don't stay publicly. >> there's always the assumption that it was backstopped by the german government. >> the german government. >> that's not a great answer. >> that's not a great solution either. >> but then you have crude below $27 a barrel and that's going to exacerbate all the selling and

the fact that so many financials, 45% of holdings are in financials. european equities are sharply lower across the board. banks as we mentioned in europe, getting crushed again this morning. there's a look at the european markets, led lower in italy nearly 5%, but the dax is down nearly 3%. europe, certainly keeping an eye there. there's the oil situation as kayla was mentioning, is down 3%. now below $27 a barrel. and brent is falling this morning. take a look at the flight to safety trade, sending gold prices surging. there's gold, 1225. that's the highest level in more than eight months now. and a look at treasuries. the spread between two and ten year moved to the flattest since

2007. you look at the ten-year yield, at one point, 1.6%. a few stock movers. shares of twitter under big pressure. the company said it saw no growth in average monthly active users. and its current revenue forecast light as well. we're going to talk to a twitter analyst in a few moments. shares of cisco getting a boost from better than expected earnings, hiked by routers and its buyback program and is projecting stronger revenue than forecast. chuck robbins will be on "squawk on the street". and some deal news this. >> mylan is buying meda.

their ceo will be joining us this morning at 7:10 eastern here on the set. you louisa boilson joins us from london. it has been escalating. what in your estimation is driving this? >> we're not quite sure. that's honest answer. i was listening to what you were talking about with regards to yellen. all i can say is from this side of the world, we've been talking about whether yellen was not dovish enough, whether she should have been more dovish and what she could say today would be different, given the selloff that we're seeing. of course we want to stabilize the markets. we're seeing not a lot of stability. lower by around 3% at the moment. you ask what's driving it. many would say it has to do with the banks and the uncertainty

there. the banks have been sold out significantly. the banking sector was off by some 6% a half hour into trade. the ftse 100 at a 3.5 year low. 5543. apple nd many of the moves we'r seeing are equally as bad if not worse than what we were looking at during the financial crisis. but people don't really seem to be recognizing that. but when we look at the sectors, yes, banks are lower, down by 6%. this happened a half hour into trade, but is there really reason for that? many said there's value to be found in banks still, and especially in these european banks that it doesn't make sense. it doesn't make sense at these levels and because non-performing loans, yes, they are bad, when you look at the italian banks, but they're not bad everywhere, and you have a number of banks coming out and saying we have enough cash, like

deutsch bank. we spoke to the ceo and he says he remains pretty optimistic. deutsch bank off by 7.5%. ubs down by more than 5%. the list continues. socgen down. they did miss expectations and increased their litigation provision from 400 million to 1.7 billion euros. but the market is out of synch somewhere. and the flattening of the yield curve. traditionally, that indicates recession. is that what we're supposed to read into it this time? >> and there's the idea that even though these banks are coming out and trying to give assurance to the market, it's not having the desired effect. it's almost like the acknowledgement of a potential capital issue, even though they say they have enough capital, it's spooking the market even further. >> yeah, it's psychology. psychology 101. maybe a herd mentality as well.

not saying some of the banks might not be as strong as they should be but how often do we have to stress test. and the u.s. saying you need to make sure, mr. and mrs. bank that you test for negative rates. more and more of these things are becoming mainstream that you need to include all scenarios and be ready for all scenarios in order to combat volatility such as this. banks have to continue lending. if they stop lending because there's too much red tape or market volatility or they need more cash, then the whole system crumbles. the system works once it doesn't work. once one stops being a team player the whole thing crumbles. it's interesting to see whether we will be facialed with another round of the recession. >> and hard to believe this is the dilemma we're facing eight years after the financial crisis. thanks. >> for more on the selloff,

we're joined by christina hooper, jack calfry here as well. christina, to you, first. is this a yellen-led selloff? >> no, it seems more like contagion. what started off as a healthy correction has become an oversold situation with elements of panic. adding to it is we have some asian countries back from the lunar holiday. >> some are looking at this and saying not sold enough yet at this point. >> well, it depends on how you see things. and in hour view, we think the u.s. is going to skirt a recession this year. so our view is that we're getting to the point where valuations are no longer stretched. >> you use this word contagion.

that's a scare eye word. >> contagion in terms of how the markets are reacting to this. >> and what's going to change the -- >> well, it doesn't look like it's going to end in the next few days, but easily, all you need is some, typically larger investors to go in and start buying. seeing that value there. so we could see that relatively soon, but probably not in the next few days. >> maybe jack is the investor who's going to step in and start putting money to work. >> i look forward to being a large investor. but it's actions and words. people in management say their stock is short all the time. yesterday you had a tech company announce a large buyback. a few ceos said i will be buying my stock over the next month or two and people responding positively. people are putting their money where their mouth is to some extent. >> do you think that janet yellen on the hill needs to fix

anything that she said or didn't say yesterday? >> i have a feeling that the fed didn't say get me a rewrite. they have a really challenging, how do i thread this needle. they have a mandate. they have two things from a mandate perspective. they don't have a mandate to worry about the level of the s&p. they don't have a mandate to worry about credit spreads. that's for markets to sort out. >> but at the same time, she acknowledges the fact that these tighter financial conditions, in part, caused by the selloff in global markets could further hurt not only u.s. growth but the employment picture as well. there's a clear eye on it. >> clearly there's a psychological element, which at some point you can't have chaos. but to some extent, if you spend all your time changing your commentary, your forecast like a pinball machine, that leads to less confidence rather than more. and i think the fed's in a tough spot, because what they are supposed to care about is

actually getting better. if you look at the atlanta fed now forecast data, they're improving. in terms of what the basic drivers should be. at least if we think about an economy earnings overtime. >> you used the word contagion in the way that markets are reacting to one another. what about the other contagion when people like kyle bass, big investor, sends an investor letter out saying bank losses in china could exceed 400% of what the subprime losses caused with our crisis, what about contagion more serious than just stock marketis reacting to one anothe? >> the contagion i'm worried about, i'm more worried around this idea, well, we know we have problems in the energy complex, and we've certainly seen that

priced into the bond markets and we keep being reminded the bond markets finance the energy not the banks. but to they start thinking i need to tighten my lending standards everywhere just because of one industry. and that would be a contagion i would worry about. and we've seen some tightening of lending standards from the senior lending last week. i would worry about state-owned banks in a less than transparent and full capital linkages. >> thanks for coming in, jack and christina. the social media stock better than expected. up 16 cents per share. but it's hardly good news. the company failing to attract new tweeters. excluding those accessing the site through text messages, it's

down from the previous quarter. the question of the day, the question confronting jack dorsey, can twitter overcome its user growth slump. he is lowering his price target this morning. so is it their fault or your fault? >> that the price target is coming down? >> yes, sir. >> i would say that, i think they did a good quarter to be honest. what was better than we were expecting was that the mix of users were more owned and operated than some of the third-party business that they had been moving into. but you can't get past the issue that they have with user growth declining. when you start to look out not just into 2016 but '18 and beyond, twitter's still a very expensive company, and as you just discussed, volatile market. and i think that getting comfortable with twitter's valuation, where you do not have user growth right now, and you have a sequential user decline,

it's just a hard thing to get past. >> what's your target right now? $17 from 19 dollars. >> you just lowered that? >> i just lowed it from $17 from 19 dollars. think went on to say that first-quarter user growth did improve. they talked about the timeline as having sort of this initial positive reaction. and i think you do have product rollouts that could help this year as well as comps are going to get easier in the last half. but when you look broader at twitter and the universe, you're still paying for a lot of sort of wishful thinking at this point. so, you know, there is the tailwind effect. and we don't know exactly how it will turn out. so we still have some upside. >> you think there will be a long downward trend in terms of user growth? >> that's the big question. when you look at the deceleration, it is steep. when it's flat, it's a point of

pretty big inflection. when you're seeing user growth cut in half to the point where now it's declining to say hey, twitter's not going to decline any further. they're going to grow a million users, a quarter going out the next five or six years or so. that, in and of itself is a pretty big inflection when you're looking at the growth of instagram and snapchat. >> i think the company knows there's a period of a few years where they missed the boat. they're trying to play catch up. they did lay out five priorities for this year, first, refining the core product, then refining live video, maintaining their influencer community, redefining the safety of the network and then building relationships with developers. do you think that's the right order for them to be tackling these things? >> not to sound harsh, but i think if you would listen to mrsa mayer, it would be similar.

i think from what we see so far, it's, it hasn't been working. but that's not to say it can't work. >> have you heard a great idea that they haven't pursued? >> well, i think that it's not so so much twitter individually, but when you look at facebook and what they're doing around their messenger product, facebook is making big investments there in terms of artificial intelligence and api immentations. >> is jack dorsey the right guy to lead this thing? >> i don't want to comment on that. i think dividing your time is probably not optimal in terms of twitter and square. >> what do you mean you don't want to comment on that? >> to say, is he the ceo for the job? >> does he have the right vision for what this is?

is this your horse? >> he's down to the business. he has a good idea of what works and what doesn't work. it's still too early to say if he alone can turn this around. >> do you think somebody tries to pick this company off on the cheap? >> it defines how you look at cheap? when you look at twitter. it is still a very expensive name. >> if google came in here right now and bought it at $20 a share. here's a better question, would you downgrade google? >> would i -- >> meaning, would you say they're paying too much? >> i think for, it would clearly be a diluted transaction at $20 a share. but when you look at the tangibles for what twitter brings to google, you could make a case. if they could partner and get a lot of benefits without buying twitter, that's a better approach. >> the ever politic.

thank you. coming up, cisco is bucking the train wreck trend this morning. we'll dig through the report with an analyst, up next. and as we head to break, take a look at the currency complex this morning. a safe haven yen getting a pop. the dollar falling below 112 yen for the first time since twourts. more on this morning's global market moves, ahead. ♪ keep on liftin' ♪ higher and higher ♪ i said your love ♪ keep on 4000 articles on leukemia. in less than a second. (speaking japanese) i can understand euphemisms, idiosyncrasy and complex metaphors. i know every detail of every public quarterly report in the last 20 years. and i'm just getting warmed up. hello. my name is watson.

together we can outthink the limits of what's possible. welcome to the cognitive era. sometimes they just drop in. always obvious. 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.

cisco systems spiking in the premarket after the fiscal skek quarter results. they raised their dividend by 24%, announcing a new $15 billion share buyback to boot. joining us now to break down the numbers, this is the triple or i guess we should say quadruple threat. you beat on the top and bottom line, boost your buyback. was there anything not to like in this quarter? >> i think this is a company that continues to execute in uncertain markets. they've shown us that they can execute when markets are doing very strongly as they did in the peak and then even today.

in fact, we're at almost peak margins in some ways. margin north of 63%. operating margin north of 30%. not much not to like as we look at the numbers. >> one of the reasons why we care so much about cisco, despite the fact that it's a $115 billion company is it's usually a barometer for what's going on elsewhere in tech because it's a global company. what's your read? >> absolutely. this has been a great litmus test for ceo sentiment, for cio confidence and frankly for spending around the world. they're diversified from a geography standpoint, a product stand point, and think always sort of tell you one quarter in advance what other companies will be telling umt the fact that they report one month later from other companies helps, of course, because they see that next quarter before others do as well. so yeah, i think last quarter they indicated there was a slow down happening in the markets. but we saw that.

last night, when they reported earnings, they said that they saw a falloff in orders towards the end of their quarter. so they're guiding conservatively but for growth next quarter as a company. >> one of the hallmarks of their previous quarter was this surge in orders in china. we saw asia-pacific orders up only about 17%. now a lot of companies would kill for that. >> kill for that, right. >> but what does that say to you about a slow down in asia? >> i think for this company we've seen asia be a little spotty over the last several quarters. this quarter, we actually saw their order growth grow faster than even the revenues they booked. so we're looking at an uptick here i think for the next couple of quarters in asia. in fact, china, which has been traditionally weak for them as a market for all the obvious reasons showed bookings growth, accelerations this quarter, so they're starting to execute. so we're starting to see in many ways asia to be that offset to the weaker north america.

>> how much of the gain in the stock is due to the buyback and the dividend increase, because if you sort of look internally within the earnings, sales of switches actually declined. >> so last quarter, switching is one of those markets that seems to go counter to where the routing market is. if one pulls back we've always seen historically the other starts to accelerate. so just at the right time, when you saw enterprises maybe becoming a little more cautious with datacenter spending to your point, which was down a little bit, switching spending, which was down a little bit. service riders picked up. and we saw that as more enterprises are adopting the cloud, that might be a trend for the longer term as well. >> we see the stock reacting the same way we're seeing it now if they didn't announce the dividend increase and the buyback? >> i think to your point, the dividend and the buyback help. i was at the company when we niche yatesed the dividend

several years ago. and of course it's a first step in a long journey always, but they continue to boost the ditch dind. the fact that it has $35 billion in net cash gives it ammunition for the long term as well. so in uncertain markets, yes, is there a flight to safety? is this considered a safe haven in ways? of course it is. not a bad yield to get in a market like this. >> and when you see mining cutting their dividends a little bit, it does seem like a safe haven. thanks for being here this morning. and a programming note, sisco ceo and tar heel, chuck robbins will be on "squawk on the street". we'll take a look at the biggest drags on stocks including a bloody session for european banks overnight. willford frost will join us, and tesla missing expectations with the stock. we'll explain what's sparking

confidence in the electric car company. but take a look at the s&p 500 winners and losers. back in a moment. ♪ in new york state, we believe tomorrow starts today. all across the state the economy is growing, with creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. like in the hudson valley, with world class biotech. and on long island, where great universities are creating next generation technologies. let us help grow your company's tomorrow, today

♪ i'm so fly ♪ that's probably why it feels just like i'm falling for the first time ♪ ♪ welcome back to "squawk box." time for the executive edge if

you're just waking up, look out below. you're seeing red arrows in a big way. come off the worst of it, but still, dow looks like it will open down about 275 points. the s&p would open down about 33 points. the global market picture isn't much better. he's been up for a while and seen the carnage first hand, willford? >> we've had a bit of red across the screen in europe. and more in asia. socgen added its name to the list of banks with dreadful results, reigniting the doom and gloom across the european banking sector. the disappointment in these earnings, it wasn't something systemic or credit risk receipted areceiplated. wider markets in europe is quite

surprising, that element of con contagi contagion. but the selling was intensified at around 3:30 eastern time when the riksbank, the swedish central bank cut its rates further into negative frorterri. i think that highlights a very crucial point that investors throughout 2016 have been worried that central banks can no longer prop up markets even if they want to. the moves we get in response have tended to be rather large. and in particular, these negative interest rates, of course, a de facto tax on the banking system. we know that investment banking models already under pressure, retail banking models getting hit by negative interest rates. i will point out this one chart, the stock 600 banks since the start of 2016. it highlights the rally that we

approached qe in europe. the start of 2015 when people thought qe's going to come along and boost the economy. and as people are focussed on the fact that it hasn't helped european banks, the focus turns to the negative selling. the selling we've had comes off an artificial boost that the banks got before they got any boost to the earns underlying it. socgen down, deutsch has been the bank really in the eye of the storm in the last two weeks affecting european banks more widely. >> thank you, willford. hedge fund manager -- >> nothing. go. >> hedge fund manager kyle bass sounding the alarm bell on china. writing in a letter to investors that the chinese banking system is a quote, ticking time bomb. he writes that a chinese credit

crisis would see the country's banks rack up losses 400% larger than those that hit the u.s. banks during the subprime mortgage crisis. here's a quote from his investor letter. chinese banking system will experience a loss cycle that will have profound implications for the rest of the world, he says. what we are witnessing is the resetting of the largest macro imbalance the world has ever seen. >> i don't think he's wrong, but we've had many other bears on china talk about being bearish, on 60 minutes three or four years ago at this point, but nobody seems to listen. is anybody going to listen today more than they've listened of about? >> his argument is the fact that there is such a knee-jerk reaction by the government in china to any speculation in the market and any sort of selloff and the fact that they're having to react so dramatically now means that there's already a problem and now is the right

time to get in. that it's the government intervention now that makes them so worried. >> he lays his case out, i would say, against a more colorful backdrop that helps validate the story he's telling. people, before, used to say that jim chanos was too early on the china story when in fact, maybe he saw it a heck of a lot earlier than anybody else or most others, and we should have paid more attention to it when it was two or three years ago. >> i'm just wondering whether anybody's going to wake up, pay attention and say, okay, this is it. >> they're certainly paying more attention to what's happening in china, because the global market's reacting, on expectations that more devaluation of the yuan is going to have more ripple effects around the world. >> but i would be interested to know whether kyle bass is interested in getting another travel visa to go to china.

>> he'd never actually been to china. >> that would make a difference. if you set foot in china, because of the yoe pass its of everything going on, do you feel like you have a better read on what's going on there? >> there's so much smog you can't see anyway. >> you realize from going there, that the consumer is actually doing very poorly, and that the strength that all of the politicians talk about here in the united states, china's taking our jobs. our companies are moving to china, on the ground, because there are $1.3 billion people per capita, it's still a very dire place to live. >> he says in his letter that people who continue to sort of say, okay, there's not going to be a hard landing, don't fully appreciate the size of the banking system and the composition of the assets of the individual banks, that they also, china has been sort of overstating the size of its reserves, which he claims has been dwindling to the point of

real concern. and that ultimately is going to be the issue, and is going to cause this massive devaluation in the yuan, further about 30%, which is only going to add to global weakness as china obviously tries to boost its exports and get more competitive. >> fair? >> we'll see. >> i mine, look, remember, he did sound the alarm as well on japan, which proved to be fairly accurate as well. i mean, they're in this situation where they, they go negative interest rates. the nikkei the other day went down 5.5%. so jgbs, the yield is negative. so. >> and he was vocal about the sovereign debt issues in 2011, 2012, so he certainly has a track record to stand behind. >> okay. coming up, u.s. equity futures are down. tesla has a bright spot. the company missed earnings expectations by a wide margin. the stock is up sharply. and as we head to break, take a look at the selloff in crude

prices. it is now under $26.50 a barrel. that's a loss of nearly 4% this morning. brent is also down barely hanging on to $30. squawk back right after this. ♪ good god ♪ we're going to rock down to electric avenue ♪ ♪ so you're a small business expert from at&t? yeah, give me a problem and i've got the solution. well, we have 30 years of customer records. our cloud can keep them safe and accessible anywhere. my drivers don't have time to fill out forms. tablets. keep it all digital. we're looking to double our deliveries. our fleet apps will find the fastest route. oh, and your boysenberry apple scones smell about done. ahh, you're good. i like to bake. get expert advice for your small business at att.com/small business. the access informationlows us to from anywhere. the microsoft cloud allows us to scale up. microsoft cloud changes our world dramatically. it wasn't too long ago it would take two weeks to sequence

and analyze a genome. now, we can do a hundred per day. with the microsoft cloud we don't have to build server rooms. we have instant scale. the microsoft cloud is helping us to re-build and re-interpret our business. this cloud helps transform business. this is the microsoft cloud.

pepsi just out with its earnings. the snack and beverage maker says it's doing well to weather

the environment. it's below the current street consensus of 4.76. it raised its dividend. these guys crowing a rilittle b. how we increased marketing and advertising by 40 basis points for the full year and 80 points by the fourth quarter. the nelson peltz group had been screaming for years for them to get their act together. hugh johnston will be on first on cnbc. >> it's up about 1% in the premarket dividend. guidance might be a little less for what they're expecting.

meanwhile, tesla reporting much worse than expected earnings but shares surging after the company issued strong delivery guidance for the full year. phil le bow joins us. >> a lot of shorts were either on twitter or e-mailing me, saying you are nuts to say that these guys are promising to deliver these numbers of vehicles. look, that's what the company's guidance is. and if you don't believe in it i understand why people are shorting the stock. we had people saying let's see if they can deliver on this. here's their guidance for 2016. between 80,000 and 90,000 vehicles to be delivered. most were saying, if it were 80,000, that would be good guidance. the fact that they are above 80,000, that's the reason the stock's moving higher. on the conference call, a lot of questions regarding the new model x suv. we've been talking about reports

of challenges. and yes, tesla had to stop production for about a week because they had engineering challenges with components. whether it was the falcon wing doors or the seats, they've ironed those out. 1,000 vehicles per week. and on the conference call, musk was candid in saying that perhaps tesla bit off a little more than it could chew when it comes to some of the features it puts into the model x. >> we put too many new features and technologies, too many great things all at once into the product. in retrospect, it would have been a better decision to do fewer things with the first version model x and then roll in the capabilities and features, new technologies over time. >> that's part of the costs that were higher in the fourth

quarter with the model x. they're slowly ramping up production. both deliveries for the model x and model s, that means tesla's going to have to really pick it up in the second, third and fourth quarters in order to hit 80,000 vehicles this year. don't forget, the end of next month, this is the catalyst that people looking for. the model three will be unveiled. it will be delivered by the end of 2017. >> i have a question for you. when you look at a number like 80,000 to 90,000 vehicles. >> yeah. >> against a macro backdrop that we're talking about, does that seem realistic to you in the fact that you have many of the markets in which tesla wants to sell in slowing seemingly by the moment, financial market unrest which could affect the spending habits of some wealthy customers. >> you're getting into the

demand question. >> 80,000 in that environment. >> i asked that specific question to elon musk last night. i said are we seeing a falloff in the wealth effect? are you seeing a slow down in orders? he and his cfo were emphatic in saying no. in fact, orders, according to them, have increased. so from tesla's perspective, the demand is there in that it can meet this 80,000 to 90,000 projection. and also, scott, you have to remember that tesla is looking at the markets different than other automakers. tesla looks at the model s as competing with luxury automobiles. it does not look at it competing with electric vehicles, which is a completely different market. and the same thing going for the model x. that's really a luxury suv, which, by the way is one of the fastest growing markets worldwide, especially here in north america, and it will be in china as well. so that's why tesla believes it

can hit this mark of 80,000 to 90,000 vehicles being delivered this year. >> mm-hm. >> well, weather today's gain is due to short sellers or real bids, we'll see when it opens. but phil, for now, thanks. summer season around the corner. mortgage applications heating up on the lower interest rates. my mortgage broker's telling me i could get a better rate. right now, before we do that, take a look at u.s. equity futures. it is looking like a bloodbath. the dow looks like it might open down 288 points.

welcome back. mortgage apps jumping 10%. an association is out with a new survey focusing on the health of the housing market. joining us is the president and ceo of the mortgage bankers association. it's good to e see you this morning. what is the health as we sit and have this conversation today? >> it's interesting. listening to the news this morning, i hate to interrupt some decent news but home sales showed pretty good resurgence in january over december up about 14% for new home sales. that's despite some pretty bad weather in the month of january. people came out and purchased. so we're seeing still a steady pace of recovery in the home

purchase market and clearly the great news is in this new home purchase index that's showing demand for new homes in the market across the country. >> you don't think people have the conversations as to whether here at peak auto, peak housing? >> we're not at peak housing because if you look at numbers, somewhere between 1.2 and 1.4 million households on an annual basis, unsignificantly from the depths of the recession. that's forecasted to continue for some time. interest rates are variable and clearly what happens here u ultimately in the path of the economy will have an impact, but there's still a lot of upside in housing news both on the rental size and homeownership side. >> are only going to continue to accelerate. we're looking at a ten-year note yield at 1.6%. >> every forecast made at the

end of last year showed a different pathway at the end of the day. it was expected to have at least one or two more this year. after yesterday's testimony that's an entirely new world of uncertainty in terms of which path we go. the average rate is 3.91% from last week. that's down to the lowest rate since april of last year. . and that actually increased if you look at the overall application survey inside the number of about 10% increase in applications, refinances spiked 16% week of week. we're seeing increased demand in refinancing and no surprise mortgage brokers calling. >> which they definitely are. maybe he's going to bite on that. >> i might bite now. i don't know. can we have a a mortgage conversation serious on the air here? >> let's do it. >> you just refinanced?

>> i did. . >> you wish you did it today. >> right. >> so my question is help us here if you're a customer and thinking of doing this. do you think you should wait another week or two? >> if you can tell me what interest rates are going to do doing forward all bets are off. but this is a very efficient market. and i don't encourage people to refinance over and over again. it's not good for the overall securities market and causes volatility. but it is an efficient market and there are various triggers. let's give you one simple statistic. three quarters of all mortgages in the marketplace today have an interest rate of 4.5% or less. the difference in interest rate has a more profound effect on bigger mortgages because 10 basis points on $100,000 loan may not mean a lot in payment.

it means a lot more in half million dollar loans. when rates drop that has a much bigger impact on the jumbo market than the e lower end of the market. you'll find out what's the best deal for you by talking to a mortgage loan officer and finding out what that does to you in terms of payment. >> good to talk to you, thanks. >> good to be here. >> rates are dropping as we're having this conversation. >> maybe i can refinance my rent. >> the tenure is at 157. it is slipping. coming up, the ceo will join uses for the first interview after the company's earnings report and just announced $7.2 billion acquisition of a a swedish drug maker. that's coming up next.

at ally bank, no branches equals great rates. it's a fact. kind of like grandkids equals free tech support. oh, look at you, so great to see you! none of this works. come on in.

the market.redict but through good times and bad... ...at t. rowe price... ...we've helped our investors stay confident for over 75 years. call us or your advisor. t. rowe price. invest with confidence. all across the state the economy is growing,arts today. with creative new business incentives, the lowest taxes in decades, and university partnerships, attracting the talent and companies of tomorrow. like in utica, where a new kind of workforce is being trained. and in albany, the nanotechnology capital of the world. let us help grow your company's tomorrow, today at business.ny.gov

watching tvs get sharper, you've had it tough. bigger, smugger. and you? rubbery buttons. enter the x1 voice remote. now when someone says... show me funny movies. watch discovery. record this. voila. remotes, come out from the cushions, you are back. the x1 voice remote is here.

breaking news, the global market sling off. meanwhile the safe havens of gold shining. another grilling of janet yellen push the markets even lower. deal making during the market turmoil. a $7 billion deal with a swedish drug maker. their ceo talks to us first on cnbc. and the serious business of toys. >> once the integrity of the box is compromised, this is original packaging. >> hasbro is not playing around. how they are keeping the company move iing trd. the second hour of "squawk box" begins right now. welcome back to "squawk

box." first in business world, joe ask becky have the day off. we start the morning off with a global sell off. reaction fed chir janet yellen's testimony setting things off this a bad way. the major averages sharply lower and the selling accelerated after the swedish bank cut rates. that's putting pressure on u.s. futures. you're going to see what some people describe as early carnage. we're at worse levels of the morning. dow opened down 338 points off. s&p looks to open down about 41 points. we're going to be talking a lot more about janet yellen's testimony as she gets ready for day two and see if she sways the markets. i'm not sure that's her goal, but that would be nice.

>> there's other factors this morning. one of them is the price of crude with oil prices sliding again. slipping below $27 a barrel sitting at $26.33. currency markets are in play. we have been telling you about the u.s. dropping below 112 yen and that's getting a lot of attention. look at interest rates after yesterday. the ten-year is fall iing yet again. it's currently at 1.55. the safe haven topping the levels not seen since last year. it's at a multi-month high. gold is at 1237 an ounce. >> we have several big corporate stories this morning we're watching. cisco can shares bucking the trend. a better than expected second quarter helped by higher demand

for its security products and routers. the company hiking dividend to its share buyback program and is projecting stronger revenue than forecast. cisco's ceo will be joining us today at 9:40 a.m. eastern time. tesla reports its 11th straight quartererly loss with badly missing forecast. the stock rose nearly 10% as elon musk promises the company will become profitable this year and start generating positive cash flow in march. shares of twitter under pressure. earnings beat the street, revenues matched expectations but saw no growth in active users and its current revenue forecast as well. myolan buying for $7.2 billion in stock. this is the drug maker's third attempt to buy the company. results fell short of estimates.

we're going to talk to the c can eo of mylan. lots to talk about. here we are with this transaction. fed chair janet yellen will be heading back to capitol hill this time facing the senate banking committee. we are joined with more of the fallout from the testimony. steve, people are surprised she wasn't more defish for one, and she actually addressed the idea of negative rates. she said we're not there yet. >> my hats off. i was on my way in this morning and had an idea of of what i wanted to say. and i was listening to you guys talk around 6:00 this morning and it occurred to me the most important question surrounding fed chair janet yellen's testimony is not what she said yesterday, it's the question you all asked around the table this morning. what could yellen say u that would make everything okay and it's the measure in my opinion of concern that the fed and central banks around the world

lack policy responses to market asks economies. a growing sense the central bank and the fed are out of bullets. she tried to strike a balance between confidence and concern. confidence in the u.s. economy would muddle through. concern with recent market volatility and weak overseas growth. so the net result was for most economists to rule out a march rate hike and forecast a hike in june. here's our cnbc survey. we found 10 forecasting a june hike if conditions improve. one in march, two in september and one in december. capital economics and financial conditions to have stabilized for the fed to begin raising rates again. one reason for the reaction could be as you suggest that yellen left interest hikes on the table if the economy rebounds. it appeared that the market would have been satisfied with

no less than total capitulation by the fed chair. they didn't get it yesterday. >> she said the pressures currently on inflation are transitory. she talking specifically about oil? >> and. the dollar. this is the idea. what they are saying is not an economic fact as much as a mathematical fact. eventually the decline in oil has to roll off the one-year comps and the surge in the dollar, which is happening with the yen and some of the other kucurrencies this morning. when those go away and you get rid of those and there's these inflationary pressures, not huge but service inflation. x energy is running 3%. that's a big part of the economy and it's being offset by the declines in oil. >> why is she absolute in saying we don't have to expect to cut rates again? why doesn't she leave that more opened and say, we've talked about some of these pressures in

financial markets and just financial conditions tightening. if it they purr cyst that could have a negative impact on growth and labor market. all options are on the table. >> she sort of said that, but when you ask that question it makes me think of something i know about being a fisherman. an oil tanker before it hits the bridge has to top three miles ahead of time. so the fed is playing this game where it basically it shifted direction in policy. made a a major shift in policy in december. she's not going to turn on a dime. especially when you see what's happening in the markets and it's not entirely u clear there are fundamentals behind what's happening in markets here. you have this linkage which one of your guests said. it's the biggest surprise of the year. find me the person who said, you know what, oil and stocks will be linked. you pair those together you'll retire at 42. i don't foe who that guy is. >> i want to continue the market

conversation and talk specifically about how the economy u and the market right now are linked and bring in our next guest. robert michael is chief investment officer. and phil orlando is a strategist. rob, i'll start with you. are the economy and the markets saying the same thing right now? >> i think they are. i think yellen could have said more and i think she should have said more. she's left the impression that she and the fed are not in touch with the mothership. and i think inflation expectations are the least of their it worries. i think there's a serious credit contraction under way. she should acknowledge that. i think she has to look at the capital base being wiped off the banks in this downdraft in equities. that's not supposed to be happening right now. they are supposed to be bullet proof. by the way, gold at 1200 an ounce, what does that tell you president bush it tells you that

in a flight to quality in a a safe haven, people have more confidence in gold than in bank deposits or paper money. i think things have gotten out of control. >> but they don't seem to have much faith in the stock market right now. we have seen what equities have done so far this year. part of that is because of the global story, but part after that is because there's so few reasons to buy anything right now. what are you buying? >> we're in full defense mode right now and have been since the first week in january. so we've taken in our global allocation fund taken down 55%. neutral of 60. we were up around 75 or 80% in various points over the last couple years. we have increased cash, increased fixed income. we have allocated to more defensive categories. so we have been looking for potentially a retest of the big up trend. things could get worse depending on what happens with the fed and the economy. so we're clearly playing defe e

defense. >> but every trade is so crowded. e everybody is trying to go into consumer staples and eutilitieu. how do you find the value that no one else finds? >> no one is going great right now. what you're trying to do is tread water here until you can get some clarity on some of the other issues. the dollar in our view has topped out at 105 opinion so we're starting to get that issue behind us. the problem with the fed and circumstanle back to what steve talking about this morning. the fed established last december called for four rate hikes over the course of this year. that's basically what stan fisher said at the beginning of the year. that's why there's such a premium on yellen this week. the market needs to see the fed come off this we're going to take the funds rate up. we came to that conclusion awhile ago based upon the fourth quarter gdp in the labor market.

in our view, the fourth quarter is going to be revised lower. first half of this year is going to bump along at 1% or less. there's very little chance -- >> why isn't it clear to you under those conditions the fed will not hike? why do they have to say what i think is apparent to anybody who follows them. there's just no way with a 1% gdp, with the markets the way it is that the fed is going to hike. >> absolutely fair point. we have read the tea leaves on that conclusion, but there are major strategists that are saying the fed plots are saying we're going to 1.25% by the end of the year. which means the fed has to come off that and tell them to adjust their models. >> there's a bigger disconnect out there. this morning we were looking at the summary of economic proexs and in 2018 they are still at

3.25 and the market is expecting less than 1%. that's what's priced into the market. so that's where the market is moving and the fed is in. an alternate universe. >> how much cash are you sitting with right now? >> depending upon the fund, it could be anywhere from 10 to 15%, which is a lot of cash for an equity shop. >> with an expectation things are going up? >> the stock market? >> yes. >> no, our expectation is that stocks are going lower. >> not by the end of the year. >> when will the inflection point come? we hope by the middle of the year, but we don't know. timing is uncertain. we'd like to think things will be better, but you have to play defense now. >> we'll leave it on that somewhat uplyfting note. unfortunately, we have to leave it there. coming up in a first interview, we're joined by the ceo of mylan.

we're going to talk about deals and drug pricing and do that right after the break. and take a look at where oil is trading. down 4%. duck under $27 barrel. stay with us. first in business worldwide.

opportunities aren't always obvious. sometimes they just drop in. 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.

watching tvs get sharper, you've had it tough. bigger, smugger.

and you? rubbery buttons. enter the x1 voice remote. now when someone says... show me funny movies. watch discovery. record this. voila. remotes, come out from the cushions, you are back. the x1 voice remote is here. box." the futures right now are still in the red. they have been in the red all morning currently sitting near the lows of the session. the s&p would open down by 40 points. the nasdaq by about 87. a lot of that is the reaction to fed chair janet yellen's

testimo testimony. we'll get more today but also the market action overseas, which has been red across the board. >> a deal in the meda from stock. this is the third attempt to buy the company. mylan announcing the deal along with fourth quarter results. joining us is mylan ceo heather bresch. there's been a lot of deal news, a lot of nondeals. a lot of noise around your company. how did can we get to meda and let's walk through what happe d happened. there was teva, then parago and now you have done this. did you have to do a deal? >> no. i think interestingly enough, over eight years ago we went from being a domestic company to a global one. and again our timing was right during the market meltdown of '08 and the we said we're going

to take the long-term view 37 we're building a large scale generic pharmaceutical company. you have to build scale and build for the long-term. you can't build a company quarter by quarter. along that line, we did our injectables around that. we have continued just bolting on continues that continue to build out infrastructure. mer back in 2014 very complimentary asset. very strategic. it would allow us to build more infrastructure around europe and put us in emerging markets as the deal fell apart. since then they went on to buy another company. we bought abbott, established products business. that made it all that much more attractive because we had built out the rx channel in europe. now adding meda gives us otc. we wanted to be in that space.

start with a billion-dollar business. so now we have critical mass around rx, otc, our geographic expansion into nice e emerging markets. 16 e we have not been in before. so it's the long-term view and we continued to deliver short-term. >> do you need to do more deals? >> we don't need to, but i think we'll continue to build out around dosage forms. we like determines. >> would you be a seller? there were a lot of shareholders that were unhappy that you were unwilling to sell the company. >> we have said we would be a seller. if our company plus the company acquiring us makes it a better company we'd be all for that. >> it's going to be harder for any company to take you guys over fou that you have become bigger, but on the meda front, it's still cheaper than what you were trying to pay for the company before. there's still conservative cske

it could be too high. >> i think you can look at trading multiples or deal multd pls. when you look at the multiple we paid, it's right in line for deals along this. good companies -- if you asked any ceo if if they could get a less than nine multiple company at $1.1 billion, it's significant and right in line with the high quality asset you see the in the markets. in the macromarket has the dynamics that's going on right now if you pay attention to the short-term price fluctuations, it's not going to allow you to make the investments. we have shown a 26%. so we have continued to deliver year over year while still investing in the long-term. >> you mentioned continuing to build out the infrastructure. with the avid deal, there will be people who will say you're

trying to get more revenue to justify that inversion. accurate or not? >> no. we said all along the abbott transaction was a great strategic fit. it gave us great infrastructure in europe. the inversion was something that came along with that. i think you look at the benefits we're getting today from a tax rate, you look at the levels of the playing field from a competitive perspective. we continue to say when you look at these things shs it's hard to understand why our country is taking the position that they want to handcuff companies to the u.s. making it a more competitive place to do business. >> do you see them coming back to the u.s.? dealt with some interesting issues in terms of how the justice department and other government agencies deal with

you. how are they dealing you're no longer a u.s. citizen? >> look, we are still doing a tremendous amount of business in the u.s. we pay taxes in the u.s. and we'd love to come back to the u.s. we didn't want to leave. i was up on capitol hill years before we did the inversion begging them to look at the tax code. make this place competitive. we were the last space to invert. i think that if they step back and make this country competitive to do business, we'd absolutely look at that. >> what would it take? for you now the rate really has to come down in a much more meaningful way than even some of the conversations taking place. >> you have o to look at it wholistically. it's not just about the rate. it's all of it combined. it's territorial. it's how they want to apply the tax code. how they want to look at earnings around the rest of the world. they need to step back and take a wholistic view of why companies are leaving and look

at the root cause, not the superficial sound bytes about companies inverting and leaving the u.s. >> have you seen a tax plan for many of the presidential candidates that you think would make it competitive u enough to come back? >> i haven't. i've heard a lot of talk. the rhetoric, i'm disappointed that on both sides of the aisle the rhetoric is that just companies are fleeing and it's the company's problem, not the country's problem. so i hope that once you get through the rhetoric of politics and whoever the next administration is that they will take a hard look and sit down with companies and have real conversations. >> hi a conversation recently who said if you're going to invert, it they should force you to live abroad. there should be something if you're going to be a foreign company, be a foreign company. if you're based here, be based here and pay. >> we don't want any of the foreign companies having employees live in the u.s.? if you're a global company,

where your domicile and where we do business all over the globe, that seems fairly childish. we have many employees. >> we have to run. you have to come back. we didn't get to talk about drug pricing. thank you for being here. >> thank you very much. coming up, two top investors in lyft shedding their holdings. we'll tell you who they sold it to, next. ♪ aflac. ohh ah ah aflac! aaaaf-lac! ta-daa! he's not a very good magician.

he paid my claim in just one day. one day?! shh! how does he do it? in just one day, we process, approve and pay. one day pay, only from aflac.

coming up on "squawk box," pepsico reporting earnings moments ago. we'll break down the numbers. janet yellen is back on the hill this morning.

we'll sit down with senator pat toomey who is gearing up for the grilling. u.s. equity futures are trading at this hour. the dow still opening down 275. "squawk box" will be right back. vo: know you have a dedicated advisor and team who understand where you come from. we didn't really have anything, you know. but, we made do. vo: know you can craft an investment plan as strong as your values. al, how you doing.

hey, mr. hamilton. vo: know that together you can establish a meaningful legacy. with the guidance and support of your dedicated pnc wealth management team.

we have some corporate earnings to tl you about among the companies that reported this morning. estimates by a wide margin on higher ad sales and increase in subscriptions. expedia also doing well this morning as well. they missed estimates by considerable margin, but it gave an upbeat forecast for 2016 and shares are on the rise in free market trading. . whole foods reported a profit of 46 cents. that beat estimates by 6 cents. let's run through the markets with two hours to go before the opening bell on wall

street. futures have been in negative territory all morning. dow opened down by 254 points, which is about 100 points better than we were just a few minutes ago but still deal ldeeply in te red. led by the european banks, troubling what's been happening with portugal and italy. all major markets are down. france is down by 3.25%. that's because of fears over the french banks now. spain is down 3.5%. italy down 4.5% e led by the banks as well. take a look at the currencies. u.s. has just risen to 112 over the yen. that's something we have been watching all morning. the euro is at $1.13. crude is still down sharply. we have been watching levels bee low $27 a barrel throughout the morning. meanwhile investors are running for cover in safe havens namely

gold and treasuries. gold sitting up 3.33%. >> pepsico can reporting earnings moments ago. revenue was better than anticipated. they are doing well to weather the challenging economic environment. also raised annual dividend to $3.01 per share. joining us to break down the numbers, steven powers, good to see you. the consensus seems to be not terribly inspirie inginspiring. >> steady performance. that's pretty accurate. but it's another safe haven. i think pepsi is delivering what you'd expect and what you'd like. $1.06 earnings was in line with estimates. there was a penny from an impairment charge that they dispanded in december. so the guidance for next year is

$4.66 is about 10 cents light of consensus. but we have seen that in staples people guiding down. where pepsi closed yesterday implies forward earnings is not egregious. with that yield you're looking at over 3% yield versus treasuries. >> is the reaction in the stock this morning what you'd expect up 1% premarket. is that due to the buyback dividend or some real metrics to hang your hat on? >> it's a combination of we have come -- pepsi has been steady for two plus years. this is more of the same. the guidance looks very achievable for next year adjusted. the dividend helps. you have people buying in because of the performance they are putting up and people buying to avoid other areas of the market.

>> i was going to ask about the activist thing. >> one is whey thought was a bizarre line. pointing out how much matchup she's spending on marketing. that's a nelson thing to say. >> it's also i think in the background you have nelson still there. they brought on mike white, who is a former pepsi executive just in the past couple months. there's activity on that front. but across staples, we have seen people putting money back in marketing. coke has been putting back in marketing. proctor has implied more marketing spending. so i think in general the companies are looking -- >> they tried to buy the yogurt company. didn't happen. do they need to buy something of size at this point or given the activist situation, do you think a breakup is still on the table? considering they haven't done a deal of size in five years. >> i don't think they need a

deal. i don't think they have done a deal because i u don't think they felt they had the right to do it as they built back from their reset back in 2012. i don't think they need a deal. i think they are ready to do a deal. >> do they have the right to buy something of size? >> of reasonable size. >> not too big. >> i mean, we'll see. i don't think they need to split up. i don't think that -- that's very much in the background of the debate right now. it's much more about them delivering on steady fundamental performance. >> just quickly, should we g surprised coke and pepsi their north america volumes were better than expected? >> i think it's pleasing. modstly surprised. i was looking for half a point growth in beverage volume. >> what does that say? >> it says that i think their marketing has been better.

i think both companies have made an effort to move beyond just core soft drinks. i think their efforts to reduce package size has helped. people have flocked to different ways to consume their core beverages and that's been he helpful. >> how long do you think she stays? >> we'll see. >> do you want her to stay? >> i think she's done a good job. over the long run, she's done a good job. she's done a very good job in the last couple years getting things back on track. she's built a constructive relationship. so based on the performance the last couple years and based for '16, yeah, i'm happy if she stays. >> thank you. >> thank you. a programming note. pepsi's c can hugh johnson will be on cnbc.

janet yellen will be on capitol hill on fed policy and the economy. joining us is senator pat toomey. your reaction to the testimony and the question and answer session yesterday and how you're going to approach today's session. >> well, i don't think we had any huge surprises from the chairman yesterday, but i'll tell you that some of my colleagues are probably going to be pushing the fed to not go any further in the direction of normalization. some will probably be encouraging them to follow the rest of the world in this mad dash to debase their currency, to go to these bizarre negative nominal interest rates. and i think that will be a terrible idea. so i'm going to try to be a voice for encouraging a normalization, a return to normal. by the way, we shouldn't be shocked if some asset prices have a bit of a rough ride along the way. after all, it was the fed's

stated intention to use this extremely abnormal monetary policy to inflate prices. if we're going to get back to a normal policy, we ought to expect to give some of that back. so i don't think that should dissuade us to getting back to normal seven years after the end of the financial crisis. >> beyond normalization, any particular issue in the financial space that you think the federal reserve should be addressing more head on and that you plan to bring up today? >> well, i want to focus mostly on monetary policy. the potential ramifications of going to negative interest rates. we have squeeen the japanese government have had a failed auction. we have bubbles emerging in europe and multiple places. . we might get into some of the regulatory issues as well. but for now i'm beginning to be focusing on monetary policy. >> she said yesterday that

monetary policy is not on a preset course. that was a line she leaned on several times. so as to not overstep the role of the federal reserve and not communicating too much about exactly where they plan to go. do you think they can actually get more specific information from her about what data the fed is looking at and what we could see given how weak the global economy is? >> i'm not sure we can. this is part of the problem here. we have a fed that's just been winging it by the seat of their pants. in one direction, this unbelievable accommodative policy, this unprecedented poli policy, which i think is very dangerous, and they don't want to tell us too much. they want to keep options available. at this point by now it's long overdue that we ask the fed to give us the rule that guides your behavior. have a rule. you can pick it. but follow a pattern. it can be driven by the data, but it should be well defined

and well understood. if you want to depart from the rule under the circumstances that require that, i would understand that too. but come and explain that to us. this mystery, these huge swings that depend on the slightest nuances of the wording of the fed's statement, it's ridiculous. markets should not be so dependent on the laibehavior of central banks, and i'd like to see us get away from this. >> we'll be watching closely today. we appreciate your time this morning. >> thanks for having me. coming up when we return, the global market selling off in a big way. oil prices sliding and gold is surging. we'll get the trader's edge. plus toys are serious business and hasbro has been leading the way thanks to "star wars." what's the next act for the toy maker? their ceo joins us with the toy story in just a few minutes.

welcome back to "squawk box." the futures right now are not looking pretty. the dow would open lower by 255 points. the s&p lower by more than 30 points. the nasdaq getting hit hard

showing a loss of 66 points. some of it have been to do with crude oils continued slide. you look at the energy space today. crude is down 3%. below $27 a barrel now. brent crude is lower by 1% as well. and how about the ten-year note yield. 1.58% is where the ten year currently sits as its slide continues for a variety of reasons. maybe not least of which is what the fed chair was talking about on the hill. weakening economy, prospective negative interest rates. that's what you get as a result of that. >> i'll tell you what you'll get after the break. toyland, we can use a little good news. hasbro's ceo will give us an

update on the toy business. movie tie ins, princesses and the hot new items. we'll talk that, markets and a lot more with we return.

welcome back to "squawk box." the markets are tanking, but we have fun news.

fresh off an earnings high, hasbro is in down for the toy fair unveiling their new line of toys including a new play-doh set. another version of their force is still strong in their "star wars" collection. that's been a big part of this. joining us with a preview of all this is hasbro's ceo brian goldner. good morning to both of you. >> good morning. >> we can talk about play-doh for a second. so why is play-doh, which has been around forever, up 32%? >> it was its biggest year last year in its 60-year history. it's been its biggest year. >> what's that a function of? >> parents all over the world love the creative play that kids accomplish u. kids love the brand and how they play with the brand. >> did you market more or do something different? >> e we put a lot more innovation in the brand and play

sets. we have put a lot more into the story telling. it doesn't have a television programming, but we have lots of online things. >> talk about that. >> these little guys. >> play-doh town, this is a new launch for us. it's all character based with play sets. >> will this turn into a media property? >> yes. it could be in social media, which is a big social footprint for this brand already. a lot of people make their own e creations and share them. we only produce 3% of the content for nerf. 97% is from the fans. they produce hundreds of thousands of videos. >> morgan is our toy expert and is going to be need iing some ts soon. >> i am. i'm happy you brought that up because i need some girl toys. you had a strong quarter. boys, outdoor, play-doh leading

sales this year. but girls, it was down 17% for the year. why? >> mostly because of ferbie. it was our single biggest throughout our business. you strip that out, we had years for my little pony. u.s. pet shop grew. we're building it back in the international segments. this year with the addition of disney princess and "frozen", as well as a whole new set of initiatives for our my little pony business. >> with the disney princesses, that's a $500 million business. what will that contribute? >> it will grow over time. this year is a transition year. we're working through the first quarter where we transition from prior product to our product. early indications are quite strong. it's up versus the prior product. so we just have to build the business over time. build revenues over time. >> i have an out of left field

question. i was talking about your company. we're not going to relitigate the past, but maybe this will help this person understand the way you think about it. you guys were talking about merging with dreamworks animation. it didn't happen, but in terms of your thinking about what this company is supposed to be, is it a toy company, a media company, how do you think about this? >> we built over ten years what we call a brand blueprint. it's all about the story telling that goes behind those brands based on great consumer insights. we're building a story in any number of ways. we green light kids programming over the last several years. we have major motion pictures coming out with many partners. next year is our first year where we'll have two major motion pictures for our brands and the transformers movie that comes in the summer and the fall. a movie we're producing and lionsgate is going to distribute. so brands today are driven by media properties. the top brands in the industry

all grow base -- >> does that mean you have to own the whole thing? >> we continue to build our organic strength to own the whole thing. this year for those people who are talking about dreamworks, we're working with dreamworks. they have a great new movie coming out call eed "trolls requests. it's very exciting. >> the mattel rumor is out there again. the age old, decades old rumor. can you address that on the record? >> it's a rumor. you have said it it correctly. we focus on our own brands and building our own brands. we're open and have done some things strategically to build out the capabilities in that bluepri blueprint. we bought a gaming company in boulder, colorado. we will announce a new game from them. so it's all about our brands now. they have a new world game later this year. so that's one piece. we did a deal with discovery to built a kids network chrks is

performing quite well for us and seeing good financial returns. we do build some things and look at some kinds of acquisitions that add on. that's really the way we think about it. >> what about the global consumer? we have been talking about how the market is tanking. china is a disaster according to some. your sense of the global consumer? >> we focus on our business u and what we can drive. if you look around the world last year, our global consumer and the toy industry grew between 6 and 10% in developed economies and double digits in the emerging companies. so around the world, revenues were up 13%. clearly afex has an impact, but we focus on the growth and strength of our brand. >> is china a growth opportunity? >> totally. our biggest brand there that's been known for decades is transformers. so it's a real good foothold for us as we build that business. it's going to take some time to build up that business, but

we're working with a couple good partner there is. >> i'm curious. how many light sabers did you sell? >> last year? about 5.5 million. >> where was that relative to expectations? >> we said it was the high end of expectations. >> of light sabers specifically? >> but you don't have the kylo? with the extra at the bottom? >> we may. >> do you think it's sustainable? >> for sure. >> at this level? there was such an anticipation for this particular film sort of stretching back from previous decades and entire generations coming back to this. >> then how does it make comps that much harder? >> then there's one that goes this way and this way. >> we have many light sabers. i'm wondering. >> here's away we have said.

last year we used a number around $500 million for "star wars." we believe that it can be similar size d this year. you have two movies through the home entertainment window. then you have more "star wars" entertainment in the next five years than you have had in the last 30 years. and this is what's driving the business. >> how much lead time do you t get? how do you know what new characters are going to be so you can start preparing? >> we need a couple years. so we've been working on the next it ration. we need a couple years. we don't aulgs get that amount of time and we rush to get product done and that's why we talked in the fall trying to catch up with some of the demand. but typically if we could have two years it would be helpful because we have to build the tooling. >> you're not in the writer's room. >> we are in transformers on our own brands. we were writing my little pony movie, but in the the in star tar. >> thank you, appreciate it.

coming up, the tale of two stocks. twitter slumping, tesla jumping. find out what has these stocks going in different directions this morning. if you haven't noticed, futures are pointing to a negative open. dow would open down 290. "squawk box" will be right back. p the soda pop flowing we need fresh ideas! >>got it. we slow, we die. >>what about cashing out? no! i'm trying to build something here. >>how about using fedex ground for shipping? >>i don't need some kid telling me how to run a business! i've been doing this for 4 long months. >>fedex ground can help us save money and deliver fast to our customers. not bad, kid. you remind me of a younger me. >>aiden! the dog is eating your retainer again. let's take a short 5-minute recess. fedex ground is faster to more locations than ups ground. at ally bank, no branches equals great rates. it's a fact. kind of like bill splitting equals nitpicking. but i only had a salad. it was a buffalo chicken salad. salad.

markets in panic mode around the world. stocks getting slammed. oil plunging and gold soaring. stick around to find out more. the bigger the names, the harder they fall. new this morning, down nearly 19% this year. the details everyone will be talking about today straight ahead. plus trending this morning. shares under pressure for twitter. we'll talk to an early investor about the prospects for a turn around. the final hour of "squawk box" begins right now. welcome back to "squawk box." first in business worldwide.

our top story this morning, global markets in turmoil and in turmoil in a big way. futures right now a little better, but hardly. dow would open down almost 30 o 0 points. nasdaq off about 75 points. fed chair yjanet yellen getting ready for round two today heading back to capitol hill. she's going to testify before the senate banking committee. that starts at 10:00 eastern time. speaking on the house side yesterday she acknowledged a slowdown of the global economy but said it's unlikely the fed would cut rates having just raised them. those comments moving markets here. this morning and in europe as well. >> in treasuries too. we're seeing major moves in almost every part of the market this morning. let's run through them all. in europe this morning, sweden central bank cut its interest rate to negative .5%. just because there are questions about efficacy around the world,

we got some news about generals earnings as well. >> let's show you what's happening in currency markets. the dollar is a significant story as well and has been. there's your look at the european banks as we continue to see what selling has been done reflective of what's going on. the euro now at $1.13. and pound dollar as well. the yield worth keeping an eye on this morning. there you can see right now at 1.53%. the yield on the ten-year note at 1.53. we're all talking about and waking up to this morning. there's gold a rise of nearly 4%. take a quick look at crude oil as we continue to track that and its relationship to how the equity markets have been trading. wti is down by 3.5%.

and brent crude is following suit down about 2%. >> let's bring in two market watchers this morning. jim, when you look at what's happening in the rates market and in the oil market, on one hand you have the ten-year hitting its lowest point since september 2012. you have oil still below $27 a barrel. goldman says it's not going to move out of the $40 a barrel band until the second half of this year. the consumer is still going to benefit. we tend to forget that because we see all this data. but can the consumer benefit enough from those two things to outweigh everything else here. >> yeah, but that's going to take some time. you said a line. you said questions about central bank efficacy. it struck me as so funny. those questions are being answered right now. you also said 1.5. we look at the ten-year yield.

it's not that low. it's actually a fat yield when you look at the rest of the world. what we have seen yesterday is i think when the chairman spoke she thought, okay, i'm giving them the dovish topping that they want on this it ice cream sunday, but the markets say, wait a second, the rest of the world gets negative. why don't we get negative rates. i'm curious to see if her tone is going to change a little bit today because the gold market and interest rate market knows something the stock market didn't know and there's absolutely no tightening. there can't be. now the stock market is saying, i want to hear it from their own voice. but two, maybe that's not going to be enough to save us because we have had zero interest rates. for so long and still are get ing out a 2% gdp. maybe we need something more. >> jim reference what is e he calls the dovish topping on the ice cream sundae. is that something the market could stomach or have we had so

much we just need to normalize regardless of what the rest of the world is doing. >> i agree with his comments. the reality is the fed might not have been dovish enough in my opinion. they walked a fine line between a rate hike and a hard place. they really probably can't do what they want for sure. they are looking and saying that's going to be difficult. much like in 2015 where they only got one in at the end. they are look iing at a tough yr for rate hikes for this year as well. one or two in, but they keep talking about the e lower trajectory. they have to live with no trajectory for the first half and start the trajectory in the second half if things can stabilize. they need a weakening dollar to make that. it's what caused a lot of liquidity crunch. it's brought in earnings for companies. that's where we are with the markets. the valuations are okay, but the earnings are coming in.

liquidity is drying up and that's what the fed is doing. if they can back off that a little more, be a little more dovish, you can see some relief here. >> you said one to two, i meant zero to one. i think zero is much more likely than two. i think you said they are caught between a tightening and a hard place. they are realizing this morning the sk the significance of the situation. there's much we can do. we have a low gdp and low interest rates aren't helping. >> when the market yesterday after yellen's testimony, the odds of a december rate hike went to 38%. february 2017 went up to 40%. do you think the market has it right there? >> no, i think there's going to be no tightenings. things are start ing ing to res again. the front part of the interest rate curve is skyrocketing this morning along with gold and what

they are saying is rates are not going up. i think the likelihood we're going to see by the end of the day. >> before we go, anything that you view as safe to buy in this it type of environment? >> i would stay with high quality names. we diversify equally. so we're not overexposed to one area of the economy. people got exposed to technology. and if you play defense with high quality and equally across all the sector, you're going to be better off. proof is in the pudding. a lot of that is due to our quality and utility. our overweights, areas of safe havens when things are tough. if investors play defense, the scary part is the environment is a 2 to 3% coupon out of bond payments. they are going to the equity markets and looking for something e e extra. that's when they get hurt. stay with quality, stay

diversified and you'll be in a better place. you can play a little defense while also getting a little offense when things are better. >> less than 90 minutes before the open of trading and it looks like a buyers strike. thanks to you both. >> thank you. corporate news. shares tanking, its user base is shrinking. we have more on that story. >> good morning, it was those disappointing user numbers that sent twitter r stock down 14%. it has recovered some of the losses, now it's trading down about 6.5%. it is on track o to open at a new all-time low. the bad news is that twitter's users numbers contracted losing 2 million to end with 305 active million users. comments on the earnings call tried to reassure that trends

are positive. >> monthly active usage in january has bounced back to q 3 levels. we're confident that with disciplined execution this growth trend in active usage will continue over time. >> the company is saying its marketing efforts are drawing new users. existing users are coming baa k to the platform and it's keeping people from quitting. the company's first quarter guidance was lower than expected for revenue, but it did point to a few bright spots saying its ad load particularly overseas has been increasing and its targeting ads to logged out users. we'll be talking to the coo when he joins us on "squawk on the street." >> thank you for that report. another one now. tesla reporting shares charging higher after strong delivery guidance. >> we'll talk about the delivery

guidance in a little bit. i get a lot of questions when tesla reports about its cash position. how quickly are they burning through cash. let's see what the numbers were in the first quarter. they expect to be cash flow positive by end of the first quarter and full year. and that's the cash portion of the story when it comes to tesla. in terms of the delivery guidance, this is why the stock is rocketing higher. 80,000 and 90,000 vehicles is higher than many people were expecting. tesla says it's not noticing any drop in demand. especially when you look at the instability in the markets and whether or not we're seeing a fall off in the wealth effect. fewer high end customers ordering a model x. on the conference call last night, i asked elon musk, the

ceo of tesla, whether or not they are noticing slow down in demand. here's what he had to say. >> i think i could see us doing advertising was interesting, entertaining and people don't regret seeing it. it's not the case for most advertising. >> that's in response to whether or not they need to add some marketing to punch up denied. u but at this point, they are seeing an increase in orders for the model s and x. and the model 3, the mass market model for $35,000, that's going to be unveiled at the end of march. that's also the same day, andrew, that they are going to start to take orders online for the model 3 deliveries beginning in 2017. >> thanks, appreciate it. coming up when we return, the bad 2015 getting worse. new numbers on the performance.

plus institutional investor unveiling hedge fund report c d card. we'll talk all about it, back in a moment.

institutional investors alpha magazine out with their hedge fund report card. investors are asked to grade in which they are invested. which firms earned the top spot in a tough year for the industry where the average fund lost 3.5% according to data provider research. which one is ranked the worst. joining us with more results is managing ed toir of alpha magazine. it's nice to see you. it was a tough year for certain. >> yes. >> who rose above the havoc to do okay? >> well, our number one finish this year was marshal ways. they are less well known outside the u.s. they had strong performance in

both their european equity u and market neutral fund last year so that helped them. >> i was going to ask you whether there would be a direct correlation to fund performance and then grade that the investors give, what you'd think that would be the case, but it's not in the fact that i'm told that last year got an a. >> they did. >> and coming off the firm's worst performance in history. >> what's happening there is investors are giving them a little bit of the benefit of the doubt based on their 2014 performance, which was when they were up 40%. and they also scored well on other factors nonperformance related factors. it's hard not to know what they are thinking. so investors rated them highly. performance alone not enough to guarantee great performance and if you have bad performance but do well in other factors, you

could do reasonably well at least for a year. we'll see how next year goes. >> if we know you're not going so well, we can still live with part of the fact that you're not doing so well. >> for a time, investors are not known for endless patience when it comes to bad performance. if the year continues to go as it has been. >> is this bad performance or volatility unto itself? if you look at bill's performance, it's up and down. he's swinging for the fences always. are there certain investors that say i can't do it anymore? >> i think with someone like other managers on the list, investors know what they are getting into. so if you're longer term, you can live with that up to a point. but if you have multiple years in a row of this performance, they are going to be reflected in both your results and also investors voting with their feet. >> green light was rated in the

bottom four. his performance last year was not good. why the disparity in the rankings. >> a couple things. one is that you may recall they opened their main fund in december 2014 to new investment for the first time in a long time. so investors who got in december 2014 got in time just in time for the start of the slide. so those voters may have been counted in this year's report card. the other thing is that green light has something called a modified high water mark, which means they can charge fees even in years where they have losses. i think they charge like a 10% fee until investors recoop 150% of their losses. >> that's different than the way the other funds operate. >> that's fairly unusual. not something investors typically are crazy about paying fees on losses. >> other names on the list that we should get to, you mentioned

zit dell. what's interesting is many of the top performing firms are ones we don't hear of all that often or certainly aren't one of the ones you'd say are the more high profile. adage capital is out of boston. the children's investment fund management is out of the uk. two sigma is a new york firm. >> adage interestingly enough are very secretive. one of the bad grades was for transparency. but they consistently rank near the top of the hedge fund every year and that's because the most favorable fee terms in the industry. they charge much lower than industry standard fees. they don't charge fees until they meet a hurdle. they actually have a money-back gauarantee, not quite a guarantee, but they will repay fees if it they have a losing year following a winning year. that's practically unheard of in the industry.

investors really like it and do so well every year. >> thanks. >> coming up, continuing coverage of this morning's wild market ride. plus breaking economic news. weekly jobless claims due at 8:30 eastern time. as we head to break, check out the price of crude oil down nearly 4%. "squawk box" will be right back. opportunities aren't always obvious. sometimes they just drop in. 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.

welcome back to "squawk box." take a look at futures. they are not looking good. better than they were before. the dow is going to open down 270 points. daz knack off about 60 points. let's show you the european bank stop stocks right now. we're looking at stocks getting crushed. deutsche bank down 7%. ubs down almost 3%. european stocks as we flip it again. more than 3%, so a lot of red.

cisco, the company hiking dividend adding $15 billion to their buyback program and projecting stronger revenue than forecast. do not miss cisco's ceo coming up. amazon's board is signing off an a new stock buyback plan as well. this replaces the buyback the company had had announce d ak i 2010. >> the market cap that size, it's hard to think that $5 billion will make a dent, but we'll see. other stocks moving, the number of users continue to fall and projectors expecting bookings that would come in below estimates. that stock is below $2. expedia is moving higher. growing demand for travel and cost savings from its recent purchases of orbitz and home away will boost its overall profit this year.

that stock up 9%. and whole foods topping estimates but sales fell for the second straight quarter. the stock down 2%. we know the company's woes have been highly publicized. the co-ceo is talking to us so you'll want to watch that this morning. nokia rose more than 50%. that was helped by some income with licensing fees. the company says its main networks business will see a slowdown in sales and some markets this year especially china saying the kwurnt quarter is challenging. also rio tinto is scrapping their dividend policy. sharp downturn in commodity prices. it will now take into account profit performance. the outlook for major commodities and the health of its balance sheet before setting future dividends.

a major contract. the company will be the supplier of chips for the next iphone beating out samsung to make the processors using 10 na no meter technology. i don't know what that technology is. >> you're not a scientist. two well known lyft investors sold $148 million in shares to saudi arabia's prince and his kingdom holding company. founders fund each sold a portion of stakes in the ridesharing service in a december deal authorized by the company. second transaction coincided with the financing when it raised $1 billion directly from investors including general motors as well as an additional investment from the prince. journal chalks it up to multiyear investment, but also questions over the viability of a second player in a market that is pretty much dominated by uber

still. >> very much so. coming up, breaking economic news. weekly jobless claims minutes away. plus the ceo of akamia is here. first as we head to the break, check out the yield on the ten-year note. stay tuned, you're watching "squawk box" on cnbc, first in business worldwide. ealthcare moe personal with patient-centric, digital innovations; from self-monitoring devices that can interpret personal data and enable targeted care, to cloud platforms that invite providers to collaborate with the patients they serve. that's why over 90% of the top 25 global pharmaceutical companies are turning to cognizant. our domain experts, technologists, digital and data specialists, clinicians and scientists are transforming the way clinical research sites collaborate with pharmaceutical companies,

and enhancing patient engagement with innovative platforms and solutions. our population's growing healthcare needs present growing opportunities for our clients: to advance the future of medicine with digital, and improve the quality of lives. ♪

welcome back to "squawk box." breaking news, initial jobless claims. the low water mark for the cycle was 255,000. now it's actually a much, much bigger drop than expected. our last look was 285,000. so this is a huge drop exactly why there's seasonal issues. also we're expecting a number within 5,000 of 285. that really isn't the big news. maybe the big news is not my bank, swedish bank. they move more negative.

over 100 basis points, over 1% negative. but don't worry. the more negative we go, the more stocks go down and things are getting fixed. don't think so. back to you. >> thanks, rick. your reaction? you like the number. >> it's a great number because we're out of the zone where claims are affected by the seasonality of the hirings and firings around the holiday season. there was wide expectation e we moved to a higher level. this seems to be a drop down. it's a pretty good indicator of what's happening in the economy. and i was joking it would be good if the jobs numbers would tank so we'd be sure all the data was terrible. you really do have this sort of counter force out there. you had good numbers in the jolts yesterday that showed people being comfortable enough

with employment prospects to quit. they have an increase of the quit rate. so that says it's an indicator when it comes to recessions. you don't typically go into recessions with job strength the way we have had it. i want to call your attention to a poll we have on cnbc.com. this is a survey of our viewers about what the fed ought to do next. if you have those screens in the background, did the fed make a mistake. 4,000 respondents, so i don't think i'm overestimating. people are engaged and 53% say no. 47% say yes. on the question of what should the fed or what will the fed's next policy move be. 16% say raise. and 6% say negative rates.

on that score, morgan stanley looking at negative rates and how well they have worked say ing it's not inconceivable but acknowledging that there are structural issues inside the much more complicated system. but basically what's happening is this long end of the curve. the spread back e below. >> i was going to ask you what you make of these unbelievable moves today down below 1.6 now. >> i'm going to associate with my remarks that say it's a rich number on the block in part because what you have is you have negative rates throughout. rates went negative. so what's happening is you have people saying look around the world and u.s. government risk free asset. i'm going to get 1 p.5.

what's holding up the short end is morgan stanley says they need to hear from the fed that rate hikes are off. but morgan stanley a really good piece says the fed needs to come out and say those are off the table or they are gone for this year. >> yellen was backed into talking about negative rates yesterday by virtue she was pressed to start that conversation. so it's saying it's a possibility. >> that's an interesting. >> people are trying to interpret by virtue of the way she answered a question about legal authority. not whether they thought it was a possibility.

>> there are different off sides. a guy lines up and then there's the off sides where the guy burst through the line and all the way back by the quarterback. it's feeling increasingly like that's the fed relative to the markets. the market is here and the fed is way off sides of where they should be. not talking proactively about negative rates. not talking about holding the line. >> it's the el fact ephant in tm now. maybe she's asked specifically whether it's on their plate as something they are giving consideration to and she gives clarity to that without talking about whether they have the legal authority to do so. they do not want to provide markets with the impression that they are thinking seriously about negative rates right now. they do not want -- she went out of her way to not provide that impression. the idea we haven't studied it fully. >> she said we considered it in

2010. >> but she said we're not sure about the legal authority. people were incredulous. denmark did it. japan did it. the fed hasn't fully studied it. there was a lack of belief that that's really the state of play of negative rates at the federal reserve. >> i'm not aware of anything to prevent us from doing it was her answer yesterday. so we don't need to have that conversation now. >> thank you. >> we're going to talk now about shares of akamai soaring on better than expected quarter cannily results. also unveiled $1 billion share buyback plan. joining us is the tounder and ce of of akamai. i don't know what the stock is doing this morning because it looks like a disaster. but when you look at your business and let's just go around the horn in the globe in

terms of the way u you think you're going to invest in your business given what seems to be taking place. >> we're investing around the globe. we're investing heavily in security. we were really delighted to it see our security business grow more than 50% last year. we're now up to $300 million run rate and incredibly bright future for that business. overall, we're highly profitable and rapidly growing. >> but given that you do have a decent pulse of what's going on, do you -- where do you see the slowdown? >> in constant currency, our non-u.s. business grew 27%. the strengthening dollar mutes that in terms of how the dollars are reported, but i would say very robust business overseas. >> you'd think over the top would be terrific for you. i know it will be to a large degree. you also have a number of big

companies that are going to be doing a lot of this connection work themselves use iing their networks. what does that mean to you? >> the media giants have had do it yourself efforts. we compete successfully against those. we deliver a better experience and a lower price point. and i think we have a very bright future when it comes to ott. >> where's the future in security? right now it's only a tenth of your revenues. you guys have access to such a larger share of the world's web traffic that investors are thinking it can be much more than that. how do you forecast it internally? >> we're thinking that way u too. it's growing very rapidly. it's something pretty much every major enterprise needs. so far we're just selling security to protect websites and applications. and later this it year we'll be introducing products that protect against attacks. that's an even larger market. >> how much of that is organic and how much do you have to buy? >> it's a mix. we have a great innovation and development engine.

and we have also made acquisitions and will continue to make acquisitions. >> that's going to be the big growth engine of this. >> i think security is a great. >> i think it has tremendous potential for future growth as more traffic moves online. we're in a great position to benefit from that. >> you think some of the big companies have always done it. now they are moving in even more. isn't there a winner take all piece? >> the media giants will have a large share of that market. most of those companies do a lot of business with akamai. >> but they are lowering the amount of business. >> no, we just had two customers. we got 6,000 other customers and big media companies that do a lot of their business with akamai. i think it's going to grow. >> tom, thank you for coming in

this morning. appreciate it. when we come back, twit ters user growth. slumping. what will it take for the company to come out from under the tweet storm. but first as we head to break, check out the dollar this morning. some major moves across the world. euro at 1.13. the yen is at 112. "squawk box" will be right back.

welcome back to "squawk

box." futures are still in the red although off the lows of the morning the s&p would open down by 28. we were down by about 340 points earlier in the morning. gold prices have been surging. the safe haven trade has been a popular one. treasuries have been rallying throughout the morning. we touched 151 for the yield on the ten-year. >> the other question of the morning we have been talking about is twitter in trouble. that's the question we have been asking and earnings beating and matching expectations but nobody seem ed to care. user growth slumping down 2 million users from last quarter. the company laying out its priorities for the year ahead including fixing confusing quirks and making the platform easier to use. will it be enough to stop the tumble. also with is, good morning.

george, is this fixable? >> well, that is the question. the question is it starts with the product first. and that's where we have had a problem for years. and that's one of the reasons why we have had low growth. so if you can fix the product, you can fix the growth. and i think that's what jack needs to focus on and that's what they will be focusing on. >> is jack capable? >> that's a totally different matter. that's not to be answered yet. >> why are people so hesitant to go there? e we had an analyst sit next to me who refused to answer that question. an investor not ready to go there. why are people so reticent to say the guy has too much on his plate. the stock is below $15.

>> it's the steve jobs conundrum. the track record of people fixing internet screw ups not looking so great. on the other hand, you never want to be the one who says it's not fixable. but twitter is in a really tough situation right now because it just seems like the product is broken compared certainly to facebook. linkedin and the valuation, they are trading at similar multd ips of revenue, but it's more of a growth hiccup while the core product is work. twitter the core product doesn't seem to be working as well. they are entirely u reliant on advertising. >> what has to happen here? >> there's some basic ideas that can be implemented.

the number one problem is that right now people go on to twitter and don't know what to do. there's no live discussions. there's some basic things that can happen. number one is when people want to know what conversations are going on in realtime. there's this new time line. is it going to work really well? if it works really well, what it should be showing is live tweeting happening in realtime and it should make you aware of it. you don't want to have to go back and discover it. it should bring you to things you're interested in in realtime. they haven't shown proof of that. that's really important. the other thing it should show you pretty much immediately are stories and interests that you have. so i've always thought it would be super interesting if twitter would buy out the tumblr property because yahoo! isn't doing anything interesting with it.

when i was involved early on with jack and evan williams, we talked about that twitter was a short form property and there would be a medium property in the words using traditional media. it's interesting that evan williams started medium. so it would be interest ing ing see if twitter would actually acquire a company like that. especially since evan owns 80%. >> if twitter try ied to buy something right now, you don't think they would get slaughtered? >> i do think they are a takeover candidate. the question is who would buy it. someone who would have enormous ad inventory and the ability to get a lot of publishers and advertisers and drive a huge ad network. there's only two people that could do that. google and facebook apple is not on your list?

>> apple is not a content company. they are trying to sell hardware and glue it together with software. their software isn't really good at doing anything. itunes is still not a sophisticated product. so i don't believe that. but i do think twitter should do something in terms of buying tumblr or a medium. there's another product out there called word press that powers a huge amount of websites worldwide. i think that would be another potential option. twitter did buy postrous, which is a blog posting company. that's been abandoned. so that's been an execution error on the part of twitter. >> microsoft could buy twitter and get away with it. they did okay with buying an enterprise version of it. apple would end up as gum on the bottom of a shoe. >> i always thought the argument against google buying is they have an api.

>> they are growing on its own. they are making a twitter a quarter. >> what does facebook need it for? >> right. >> i think it's still $10 billion now, more than that probably to acquire plus the cultural issues, management turnover, moral issues, who really wants to deal with it that if you don't have it. twitter does have -- it is an iconic product. as i keep mentioning over sand over again, the people who use it do continue to use it day after day. i do, but the people who don't use it are they going to get sucked sbo the experience when it can be an abusive place, it can be just sort of a nasty place to have a conversation. it can be a bathroom stall. >> hasn't the growth in their maus sort of plateaued? answering your very question. >> it has. and they are cheering the fact

that in january they weren't continuing to decline. and that the daily active users were sticking around better than the monthly active users suggesting that the people who like us really like us us reall and the people who don't care, we can sort of afford to lose them for now, but we believe these marketing efforts will propel growth. you don't really want to hear that from a company with a technology that is just supposed to have global appeal. >> what about an activist, activists look at this and say this is about as ripe a picking as you could ever find p. >> i think so. they could force a ceo change. up until now, since jack has taken over as ceo, we haven't really seen significant results. i think we could probably have another into quarters that jack will have the ability to do something. the core thing though is we need a singular focussed person to drive product. jobs with apple.

marissa is not doing that with yahoo!. i don't mean to give her grief, but she's not. but this company needs someone who is a product genius doing everything that is possible afternoon product. the company was formed by jack and evan and a couple other people working on product. so right now that is splis spli. without that there will be no growth. >> george, thank you for wake up early. appreciate it. jon fortt, as well. coming up, jim cramer will give us his take on the market swings next.

let's get down to the new york stock exchange. talk about a birthday hangover, jim. >> what a show you've had this morning. i listened to being a ca being and said when we see they're

yielding 3 and 3.25, are we really supposed to run from them? futures say you must panic. never played out well for me, but i'm just listening to you and thinking where is the horrendous u.s. story. asia horrendous, russia, europe. i'm having trouble crafting the more horrendous u.s. story. >> what does janet yellen need to do differently today if anything? >> the questions yesterday were much smarter than usual. how do you factor in the collapse of allies like a brazil, a huge decline in the p peso, should we worry about these things. i need them to ask her what should we be worried about because the sanguine nature of this idea that we're at 4.9 is

very, very 1976 economics. the classes that i took are somehow not valid. and it's a shame because a 69-year-old fed chief may not know how not valid her own thinking is. >> but you're basically saying i know it's ugly out there, but we have a good enough story to tell here in the u.s., don't get in your bunker quite yet. >> and the idea that we're as bad as everybody else is fanciful and yet we trade with everybody else because the futures are linked. if you have a credit line that is being drawn down by chesapeake, it's a real issue. and the she can talk about problems in the banking system. but when the smoke clears, do you really want to sell pepsi if it yields 3.25. do you want to sell time warner at 3.5. how about the ten year. i'm looking for yield. obviously you don't want to catch a falling knife. maybe caterpillar's yield is too high. and what bob dudley said last

time for b.p. was incredible. he'somedicomedian. i've got clubs he could play. every tank and swimming pool in the world will be full? he's the carson of the oil companies. >> we'll see you in a bit. >> carson, not letterman and not colbert. he's carson. he's the king. >> thank you. we'll see on you "squawk on the street" next.

this just got interesting. why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision,

or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card

good thursday morning. welcome to squawk on the street the. i'm kacarl quintanilla. busy earnings day. yellen back in front of the senate banking committee. europe's losses have moderated some. still in the 2% to 3% range as the banks get punished there. our ten year got to 1.55. oil below $27 is near a 12 year low. big show this morning on did he go. we're talking live to hugh johnson of pepsi, walter rob of whole food, and o