now by 60 points, dow by 8 s&p by 12 follows a percent gain on friday. quick look at currencies, the main mover is the pound below 1.29. it's down 0.87. >> that is one of the movers. i promised them movers. >> "power lunch." wi wilf, thanks for being here today. joe will be here for halftime. >> out in englewood. >> stick around. >> take a nap, i think. >> join joe today, make sure you join us tomorrow. right now it's time for "squawk on the street." ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with melissa lee and michael santoli at the new york stock exchange. cramer and faber are off today. this week alone brings job number, fed speakers, still waiting for clarity on deutsche's ability to settle

with the doj. germany closed for holiday, uk pmi was strong, brent may close above 50 for the first time since august. road map begins with the first day of the last quarter, q-3 in the books. looking ahead to what y can expect from the usually positive 4q. a bombshell report about donald trump's taxes over the weekend shows he could have avoided paying up for two decades. we've got all the details. and that deutsche bank saga that rocked global markets far from over. we're going live to the company's headquarters in frankfurt for the latest. first up though, history shows q-4 is usually the best performing quarter for stocks. will that trend continue this year? friday's rally capped an upbeat q-3. tech sector post d its best quarter since 2013. s&p with a 3% gain, dow up 2%. a lot of talk about seasonality, what the end of the year brings. i was surprised west texas usually down in q-4. so a lot of questions in this

one of course with even more question marks than usual. >> more than usual not just because of the election year, of course you had that little bit of a pushback that octobers in election years tend to be weaker than average, but also seems to me the seasonal almanac stuff has not exactly been flawless this year. september was supposed to be weak, supposed to sell in may. all that stuff i always say it's climate, it's not weather. it doesn't really tell you how to dress tomorrow, but it's general tendencies of how the market operates seasonally. >> seems the adages are being thrown out this year because there are so many unknowns when it comes to the election. it will be interesting to see in the fourth quarters and sell. we've seenuge gains, really interesting case of a dumbbell market where we see people searching for defensive names, but also the growthy names like the ipo we've had recently debuts to sunny successes as well as technology. >> technology definitely dominating the news flow today. more reports about potential

twitter bidders. facebook getting into a marketplace like product that has e-bay under pressure today. ft with the story that google may unveil its own line of branded phones. so that momentum's definitely carrying into q-4. >> and more news potentially on possible qualcomm bid, right? we have a lot of stuff going on. i do think these big companies they have very valuable currencies. i just feel like the huge platform companies, people assume they're going to continue to dominate more and more adjacent areas that's what you're seeing with these initiatives. >> i think semiconductors is going to be interesting. trading at a forward p/e of about 32 compared to the tech sector roughly around 21 or 22. they've got the currencies, it's a matter of whether or not they're going to step up and use them. obviously there's qualcomm and nxpi floating around. and this is really been a sector that's been leading year-to-date within the leader of technology. >> i also say like to say semis are kind of like the industrials

of tech. >> exactly. >> it's kind of what the industrials used to be. it's actually matched by a little of the old dirty industrials, machinery stocks leading, emergency markets in general up. these kind of global growth plays in addition to semis seem to be working. the question is does that give you a signal about the economy for the fourth quarter or a rotation into a new group that has lagged those defensive groups for all year? >> what's interesting about the semis as takeout candidates is big percentage of revenues are actually not a motive. so these are a crossover that old line manufacturing view of the economy, the transports, but in the new age. >> yeah. on a day where we're getting auto sales. i see toyota just coming in up 1.5, a little below estimates. we're going to await ford and others later in the morning. politics the other big driver. donald trump's taxes dominating talks surrounding the election over the weekend. our chief washington correspondent john harwood is live in d.c. with more on that. >> good morning, carl. a lot of discussion about donald trump's taxes, pressure for him

to release, suggestions from hillary clinton in the last debate that maybe he had not paid federal income taxes. well, "new york times" broke a story over the weekend that provided some concrete details. what they got was mailed to them anonymously three pages of trump's 1995 tax returns that indicated that he claimed a loss of in excess of $900 million that year. and the tax laws give you the option of writing off income for 15 years after and three years prior to a loss of that kind. now, it doesn't show what did happen. it shows what could have happened given the income that he got in later years. don't know how much he would have reported to the irs, so we don't have those further tax returns. in any event, the trump surrogates were out over the weekend on the shows indicating that they thought the fact that he'd come back from a loss of this magnitude to his present wealth was a sign of financial skill. >> the reality is he's a genius.

what he did was he took advantage of something that could save his enterprise, and he did something we admire in america. he came back. the art of the deal is all about that. he talks about it. >> now, trump has not spoken publicly of this. he did tweet and say i'm the only one who knows how to fix this broken tax system. hillary clinton has also not spoken out publicly on this. she tweeted as well saying that how can you say that you're good at business if you have a loss of this kind and haven't paid taxes? hillary clinton will have an opportunity to address it today when she appears early afternoon in ohio. she's also expected to go after mylan and wells fargo and make it easier for consumers to engage in litigation if they feel they've been wronged by big corporations. and donald trump will speak later in the day in colorado. we'll see whether he addresses those tax stories directly, guys. >> john, you know those of us who cover business news for a living, tax loss carry forwards are not an unfamiliar

instrument. but how much of a surprise does this really come to for normal americans, everyday voters, and how much does it sway them? >> well, that's the roadway question. we don't know. and, you know, it will take some -- a few days for reaction to this to filter in to the public polling that we have. but remember, people have been hearing the idea that donald trump hasn't paid taxes for some time. will they see in a significantly new way that possibility once we see the magnitude of this loss? or is this simply going to confirm things that people already suspected? don't know the answer to that. donald trump was already suffering, however, damage from that first debate. the second one is not until the ninth of october. so to the extent this adds to the negative momentum he had, that is challenging in a race where he's behind to begin with both nationally and in battleground states. so donald trump's got to find a

way to stop the bleeding and get back on offense. he indicated in interview last week with "new york times" he might do it by going after the clinton's marriage. and there was a story in "new york times" today about hillary clinton and how she reacted to some of those marital problems that bill clinton experienced in his relationships with other women. don't know how voters are going to react to that. that's another thing we're going to have to wait and see for the opinion polling. >> all right, john, thank you. john harwood in d.c. for us. now onto deutsche bank. speculation surrounding a possible settlement between the u.s. and the german lender. julia chatterly joins us live from outside deutsche bank's headquarters in frankfurt. good morning, julia. >> good morning, melissa. as you quite rightly said, speculation here rife, but no further clarity. and obviously investors have been seeing that the stock market here in germany shut for a holiday today, so closely watching what happens in u.s. trading with the deutsche bank adrs to see if we see any dis appointment after the relief

rally on friday with those rumors swirling of a potential $5.4 billion settlement. well, i can tell you if that number were correct, under german law deutsche bank would have had to have come out and confirmed it. and of course they haven't. so you have to assume here that the talks will ultimately be continuing. deutsche bank execs are in washington this week for the imf meeting. so as far as geography is concerned, they're in the right place to have those talks. but, hey, for all that i can tell you some juicy headlines here over the weekend, too. you had the likes of certain papers suggesting this was the united states waging economic war on germany. where did this $14 billion amount come from? and if you look at some of the other settlements we've seen from other banks, and i can show you them, comparable in terms of consumer market size, the likes of goldman sachs and morgan stanley. you're talking about a figure in the range of $3 billion to $5 billion. so you can understand some of the confusion here in the fact deutsche bank itself was

expecting a lot less. what we've also seen irrespective of this charge is a whole host of ceos here in germany backing deutsche bank saying they'll continue to do business and they stand behind them. nothing more than you would expect, it seems, but one man putting his money where his mouth is, the basf chairman actually saying he bought deutsche bank stock last week. so he as well as other investors watching the u.s. adrs today just to see what sentiment tells us today. but on the talks, we keep waiting and watching. back to you. >> julia, thanks so much for that. julia chatterley joining us in frankfurt. imf meeting this week, we expect cryan to come to washington and try to hammer out a deal over the next several days as emp's together. >> that seems to be the sequence they want to go. people realized this $14 billion check didn't have to be written right away, wasn't going to immediately deplete the capital, but i think that number is going to matter a lot to the market

and whether it's capital raise or something else. >> whether or not the check has to be written right away, they would still need to do a capital raise should it be more than the amount they set aside. but it's interesting there's a certain irony involved in this because this is a fine originating from the original financial crisis which threatens a perceived financial crisis in europe in the current age. >> yes. >> goes around comes around kind of ing. >> and those trying to compare any number to their reserves have to bear in mind not the only litigation they have to worry about. there's lots of other things you want to cover exactly with those reserves. we'll watch deutsche closely today after crazy ride over the last 48 hours of last week's session. we mentioned toyota a moment ago. september sales increase of 1.5% from last september. lexus division got a 2% gain on a volume basis. estimate for the run rate of the industry is still 17.3. we'll see if that makes itself seen later on today. but auto sales are one of those

constants month after month barring a dip in the middle of the year. >> but the stocks stink. >> the stocks have been tough. the stocks have been kind of telling you whatever the actual number comes through for this year, it's kind of -- the cycle's probably peaked and it's not necessarily going to pick up too much at least in the last few months of the year. >> when we come back, a look at today's movers, a lot including tesla, record quarterly deliing that stock a boost. later on, gopro hoping to get a new lift from camera line that went on sale over the weekend. we'll get you up to speed on cabela's and bass pro, a bunch of other stuff going on on this busy monday. futures are in the red. more "squawk on the street" in just a minute.

ford out with auto sales for september, down 8% for the month, estimate was 8.5. couple notes, best month of the year for the f series, but also nissan up 4.9 bucking expectation for a decline. so auto sales continue to pour in. sticking with autos, tesla

premarket, deliveries of about 2,400 vehicles, quarterly record up 70% from q-2 and more than doubling year ago levels. tesla expects fourth quarter deliveries in production to be at or slightly above q-3 estimates -- levels, excuse me. company sticking with second half guidance up 50,000 vehicles. you got to think this is the first time in a long time that tesla's actually come in and beat expected delivery numbers, beat its own forecast. and also to say that it can be on track for the second half of the year in a year in which the solarcity deal is going to come up for vote. >> yeah. >> that's a big deal here. >> deliveries seem like they're on track. i think the market's going to have a little bit of a relief reaction to that. as you say, it's really about maintaining guidance for the back half of the year of 50,000 vehicles. they put the caveat in it's sometimes tough with winter weather. you realize how close nip and tuck it is for them to make numbers every quarter. stock's traded heavy ever since that solarcity deal was

announced. >> that and also the autopilot, the fatal crash announcement june 30th. this is a quarter wrought with reasons people not to buy cars and yet delivery numbers seem to prove there hasn't been a let up in demand for these cars at least so far. and also the production of the x doesn't seem to be a huge factor, so that's good news for people concerned about the execution on the model 3, which is coming down the pike too. >> for those who say these new models are the fastest cars ever, the joke is that they need to learn how to make the cars faster, not just a faster car. that's the joke going around tesla. we'll watch for that. couple other things, we menti mentioned bass pro and cabela's, reports are now 5.5 billion all cash deal. you mentioned on twitter this morning going to get a stink everyone though some of this is not quite as high as it once was. >> 8% of the share flowed has been short still. for a while considered vulnerable to gasoline prices because people have to drive to

these big kind of destination superstores. i think this was the deal everyone kind of assumed was out there and waiting. i will say $65.50 share little below where it traded at its peak in the low 70s in 2013 and '14. not a bad outcome, activist investor of in terms of where retailers are trading. >> cabela's also benefitting from gun sales which have been strong this year. that's been an uplift. you have to wonder if there's going to be any sort of marginal impact on dick's which has already benefitted from the bankruptcy of the sports authority even just on the margins that could also be another reason to stay at least within the trade on dick's. >> it would seem -- and also this is going to be private company. bass is a private company. it's going to take one more kind of sporting goods play off the market. >> wow. for a country that cramer said was overstored, we're getting a little more understored over time. definitely true. when we come back, interactive brokers ceo joining us this morning, the billionaire will tell us why he's backing donald trump for president. take one more look at the premarket as we kick off october

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we are about nine minutes before the bell. let's bring in kenny of o neil securities. don't tell me we're on pause until november 8th? >> i'm not going to say that. i think we're backing off today because we really rallied on friday. end of quarter, marking up positions, window dressing

thing. i think we remain stuck in that 2130, 2180 range. no reason to break out or break down until we get through the election, until we get through december really with janet yellen. i think the next thing really on the forefront is the macro data and earnings report which begins next week. >> you mentioned this range, kenny, we've been stuck here maybe 11 weeks, i think the s&p hasn't really gone ywhere. but within the market it's been a little bit of a different character, right? you have some of the more aggressive or cyclical groups as well, plus tech, you would think these dividend stocks would rally with treasury yields backing off haven't been leading. >> i'm not sure. if in fact the fed raises rates, i think people are starting to look forward. not only it's going to start in december, if it starts, but then she's put it on a path although she's pulled it back, but she has put it on the path in 2017 and 2018. i think people are starting to look four, five, six months out. i think it makes sense. >> four, five, six months out, don't you think valuations by then will be -- i mean, we're already about a percent away from record highs. maybe less than that at this

point. in terms of valuation do you think the market anticipates in four months or five months and starts to pull back a little bit? >> no, i think actually the market is sensing after we kind of get through earnings season we listen to forward guidances, i think the market's sensing if the macro data comes in kind of strong mixed to strong that in fact they'll look for higher markets into the new year. >> so the baton will actually be passed. >> i think it will be passed. i think it will be. >> got a jobs number friday. >> got a jobs number friday. >> we got the biggest hawk and biggest dove speaking. >> so therefore the markets will remain confused. but the jobs number on friday looks plus 170. we're creating jobs 20% lower than we did in 2015 because we created 229 a month on average. now i think this year we're about at 180. but everyone tells us that's good enough to keep us going. it's good enough to keep us out of a recession. it's good enough from us going down the drain. let's just see. >> the year-to-date top gainers in terms of sectors, energy, telec telecom, utility and tech in order.

>> yep. >> are we going to finish out the year like that? do you think there will be a horse race at the end -- >> energy changes based on opec, they set themselves up for failure because if november comes and they don't do what they say they've done, then i think energy collapses. i think they lose credibility. if they cut the way they say they're going to cut and everyone plays nice in the sand box, i think energy could get a boost and lead to a lead going into the new year. >> i tre's any doubt about supply discipline and oil price stays where it is, so the question is what is $45 oil imply about supply? maybe it's not saying it has to be -- >> i don't necessarily think oil's going to run away. i think right in here 45, 50 is where it's going to stay. once it hits 50 the u.s. jumps in. we can fill any void that opec decides to create. i don't think there's a reason for it to run away, but yet what that says about the energy market especially in this country is that it's firming up. >> what do traders do when they read polls coming out of battleground states?

>> i think they're confused. thing they are confused. there's one day when i really feel good about what the future could be, and then there are other days i get completely, completely disoriented about, you know, kind of the conversation that's going on and these six or seven states which are really going to determine, right? because here in new york -- here in new york it is what it is. my vote doesn't count in new york. but one way or the other i think that's why you get this confusion. >> kenny, thank you. >> the first opening bell of the quarter just minutes away.

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you're watching cnbc "squawk on the street" live from the financial capital of the world. opening bell in just about 90 seconds as we kick off the month of october and q-4. it's going to be a very big week. at least seven fed speakers this week, a jobs number on friday, waiting for headlines on deutsche bank potentially this week, imf meeting, five weeks until the election, clinton goes back to ohio today for the first time since labor day essentially. so a lot to watch.

>> yeah. on the clinton speech it will be interesting to see how mylan and wells fargo react. she's expected to name them specifically as bad corporate actors. americans to have an easier time filing suit against these bad actors and if these guys are mentioned by me, that could ignite a storm of concern over the role of government and increased regulation on these particular sectors. >> more specifically on drug prices. seems last week there was this survey coming out showing bipartisan support broadly among the public for some kind of governor on farp supharmaceutic. so a lot of that stuff does come up whenever her lead in the polls looks more secure. >> a big day for global macro. a lot of pmis. uk pmi, again, proving all the brexit chapters won almost makes your head spin how the data out of the uk has performed since

brexit. >> march 27 -- yeah. >> theresa may saying rock and roll. >> showing i guess in this instance currency can adjust and maybe help export. >> there's opening bell. and over at the s&p at the bottom of your screen at the big board this morning it is coty celebrating the acquisition of proctor & gamble's beauty brands. at the nasdaq, singer musician sheryl crow, breast cancer survivor and hologic maker, kicking off breast cancer awareness month. we'll keep our eye on all of that. looks like we're going to get gm here as numbers are coming in for september, sales down 0.6 for the month. that adds to the numbers we already have so far this morning including ford, nissan and toyota. watching numbers about the

international story remains a big piece of the puzzle for a lot of these guys. >> china definitely. and there are some concerns or inclusive ccernsbout europe and as to whether or not a financial -- i don't want to say crisis because i don't want to overblow it, but concerns about the financial system could have a longer, bigger impact on this economic growth, dampen it and put a damper on sales which would be a concern here. >> this cycle's run so long. i think you kind of run out of that story that there's tremendous pentup demand. so it's really about i understand lying growth in the economies. the stocks are kind of shrugging here. they're against their lows and i don't think they're seizing on the monthly numbers so much. want to see signs there's anymore life in this cycle. absolutely. watching financials, we mentioned wells fargo, but of course financials will depend on how deutsche bank trades this week. ceo john cryan, what could he say in terms of an update on deutsche bank? we are watching shares right now the adr is what you're seeing on your screen just down slightly

0.7%. but financials on friday remember had their biggest game. they were up the most in eight weeks. big bounceback on friday, sort of settling in on a monday. but there's a lot of events this week that could determine the trade here in financials. >> yeah, i mean, obviously rates are not helping them right now. so it is all about kind of the systemic indicators. everyone can say i don't think, you know, deutsche bank is anything like the cataclysm we saw in '08. but there's a lot of room between what we saw in '08 and everything being great, right? i think that's what the market doesn't know about in terms of just general bank stress. >> we mentioned facebook earlier in the morning. they've announced this new marketplace feature, facebook marketplace, with a dedicated spot on its app for android and iphone smartphones. shares of e-bay are down almost 3%, the worst s&p loser today. again, sort of it's like a bully taking candy from kids on the schoolyard. >> well, it seems like it although facebook has tried something similar in the past. it wasn't really a mobile based function, but it seems like, you

know, anything that facebook whispers it might want to get into and you have the ripples in the rest of that general space. facebook interesting though, i mean, there are these buy and sell groups here. and it's not like facebook is necessarily looking to make money on each transaction. so it's a little bit of a puzzle as to exactly how much it would hurt the core business of e-bay. but every little bit is probably reason to worry. >> obviously ad dollars is what makes facebook go around. and political season there's going to be a lot more ad spending it is projected on political ads on facebook. that could be a real help. that's something we probably will see not in this quarter that they are reporting. we will see some glimpses of it, but probably in the next quarter that they will report. >> m&a in the media space remains a big dynamic. reports of course now that cbs board's established a committee to look at a viacom merger. politico out with news last night that a gannett deal imminent today and bloomberg with the story that google has acquired or retained lazard.

>> stock up a little bit as much as 3%. just this morning clearly the idea that this is maybe transitioning into an end game scenario for twitter. or some kind of an open auction. it's definitely not confirmed that that's what's going on here of course. a lot of it seems like it's everyone who seems like they have a responsibility to take a look is going through the motions of taking a look. >> it's funny. almost like when you go to an open house for real estate and you see somebody else there and it sort of spurs you to bid. all of them came out for so long we were thinking if twitter's not bought by now, it's never going to be bought. and all of a sudden they all come out of the woodwork around the same time. but it does put more credence behind the idea it will be bought after so long sort of discounting every single report. because every single report in terms of stock going up, the stock has plunged afterwards. >> yeah, comes at the same time the times does a piece on harassment and bullying. the company maintaining they're working on user abuse in terms

of how they treat other users. that coupled with mau flat lining for six quarters, still a lot of liabilities for any potential bidder. >> liabilities and a cloudy picture of how you have a path to sustained growth and profitability, which is why a salesforce interest which reportedly is what touched off this process. you have a feeling if salesforce thinks of it as some kind of a more professional tool or some kind of a platform that's not just about kind of the world's raw information then maybe they would have fewer qualms about trying to restrict speech. i don't know. >> twitter's got to be the thorn in the side of every internet analyst out there because the ones who stick by the fundamental story will just cite the flagging metrics twitter has been posting quarter after quarter and just had rbc's mark mahaney and you had him here on "squawk on the street" with probably the most unfortunately timed downgrade of a stock in recent memory at least. >> did he go to underweight? >> i think he went to

underweight just a day -- >> faber's initial report. >> yeah, the night before that report dropped. >> i do think analysts kind of give themselves a pass say, look, we're not going to handicap the m&a situation. we're looking at numbers based on a survey they did of advertisers. absolutely right, didn't help clients that day. >> i think the survey looked at ad buyers and their basically interest in spending on twitter. the metrics from the february survey showed that fewer of them were engaged on twitter, had less interest in buying on twitter. so the rationale for his move made sense, but just collided with david's reporting. >> the whole life cycle of twitter reminds me of netscape. but as a company it was never really a home run, it ended up inside of aol. >> are you making an analogy? are you saying twitter is the next netscape. >> ushering in this whole way of interacting with the internet. and then as a company didn't necessarily fulfill all that, as

a profit making enterprise. >> dow's down about 80 points. we got dupont leading, but pfizer underperforming. i wonder, mike, if you see the fourth quarter as another one in which -- i mean, is it a campbell's soup market or an amazon market? >> it's really interesting. campbell's soup it looks like that trade's on the defensive. again, with yields going down you would expected them to rally. mccormick spice i think is my favorite of that entire group. massive pricing power. kind of a rare company. good earnings beat this morning. and looked like the stock was not really going to react. in an amazing performer over many years but down 1% even though they raised guidance to the end of the year. i think the market is looking to try out this more cyclical growth oriented trade for as long as it lasts. >> that's why technology has been such a good third quarter. it's because people are searching for that growth. that's why all these ipos recently have gone gang busters on first day of trading. people are sort of looking for that moon shot to the upside especially going into the fourth

quarter. there's going to be a lot of that going on, how can we catch up on performance from the previous year. in terms of big movers, i'm watching janus, with henderson, an all stock deal $6 billion. we're going to have the ceo later on about this deal, but of course this comes at a time when funds, when asset managers are really on the search for selling new products. got to find new products and will actually match their benchmarks and beat the benchmarks and that has really been the problem for people in the market and out of the market and watching, they probably looked at mutual funds and what is going on here, what am i paying these guys for. but this is a big deal. i'm going to see a lot of the uk and asset managers whether they will feel the pressure to do some sort of deal. we saw aberdeen in european trade raise higher initially on the trades of this. is there going to be more consolidation within fund management here? >> yeah, janus within the asset management industry kind of a mid size player even though kind

of complete heart of everything in the mid '90s. leveraged to the stock picking funds as you mentioned have had a tough time. i think the question is that section of the industry seems to get rolled up somehow. >> yeah, there's got to be rationalization in terms of funds. >> cue all the jokes about h henderson to janus. let's get to bob pisani on the floor to see what's moving. >> good morning, guys. we were just about even about an hour ago. and we sort of lost steam going into it. part of it may be what's going in rope, pound weaker as brexit plans are firming up over there. take a look at european banks, deutsche bank, those are the adrs because germany is closed today. there's no deutsche bank trading in germany, but here you see in the united states all to the downside. so that may put pressure on us here. sectors in the u.s. a lot of continuation of trends that we saw in the third quarter. so energy had some momentum in the third quarter. materials had a little bit as well.

technology definitely had momentum, largely belong to semiconductor stocks. we did really well there. fading a bit by the end of the third quarter was banks and utilities. and that is the case here today as you see both of those groups to the downside. energy stocks i mentioned coming on strong. we did touch $50 in oil but came off of that in the middle of the -- late in the morning here. but some of the big energy names still to the upside, chesapeake and marathon, anadarko, occidental just turned positive. fractionally to the upside. as for volatility, well, this is supposedly the month you're going to see it. now, remember, september is often a volatile month as well and it turned out to be a little bit of a bust other than some comments by a couple of fed officials, rosengren in particular, that were unexpected. it didn't move markets that much in terms of volatility. october is far and away the most volatile month overall. there's a couple stats that have always been floating around, it's the month with the most 1%

moves in the s&p 500. in it i think about 30% of the trading days see moves of 1% or more. we'll see. obviously the election's coming up, we've got two more presidential debates as well. but so far bets on selling volatility have not worked out very well. buying volatility rather has not worked out very well overall. guys, and melissa, we're talking about this deal with henderson and the deal with janus. i think this is a very interesting deal. remember, this is the home of bill gross. and this is billed as a merger of equals, theoretically, but this is very much about the fact that indexing is gaining rather dramatical dramatically. and janus is one of the very well known active management companies out there. they don't do a lot of passive management. there's clear indication there's some pressure out there for funds that are in that active managing space to consolidate a little more and figure out some ways to get bigger here. it is billed as a merger of

equal, by the way. i want to make you aware of a new program that's beginning on all of the exchanges today. this is four years in the making. it's called the tech pilot program, and basically small cap stocks are to be able to trade in nickel increments. it's going to cover 1,200 stocks. there will be three different baskets, a little complicated a two-year pilot program. but the volume and trading in small cap stocks has been declining for years, major problem as particularly biggest 100 stocks get all the trading. the small caps die. the question is how do we figure out how to get more trading in this particular area, and the answer is let somof them trade in nickels, maybe that will attract more volume, more attention, more analyst coverage. not clear any of that is going to happen but this will be going on for the next couple years. see some of these small caps now quoted in nickels. by the way simple retail investors will be able to continue to trade in pennies. these are institutional trades. number of companies that are participating in the program is

bankrate will be in this, international speedway as well. more on this on tradertalk.cnbc.com. right now the dow down 83 points. back to you. bob, thank you. bob pisani. let's head to the bond pits, rick santelli at the cme group in chicago. good morning, rick. >> good morning, melissa lee. a two-day of 10s, we're up a little bit. but it's more of the short end. a bit more flattening as 2s, 3s, 5s, a little more selling pressure pushing them up. but virtually we're within a couple basis points of unchanged. look at august 1st of 10-year, this is the chart you want to pay attention to. look at how compressed it is. now, grant it there's a drift of higher rates, but lots of wood, technical wood, lots of price structure right around this area, especially right below it. if you look at bunds, very similar since august 1st. but i do caution the difference between the 2's under scrutiny, there's a more flattish look to what's going on bunds, a slight rise to the 10-year rates.

jgbs now hovering in this minus 9 to minus 7 range you can see since july that it's elevated. but it's now sideways as well. foreign exchange, the dollar is definitely not having a terrific day, but it is doing better against the euro, the dollar index is very euro centric. yes, it's up today, but what should jump out at you on this chart is how it's kind of tri anglating. we're not near the bottom, we're not at the top, we're thrashing in the middle. there aren't a lot of dynamicing thrashing in there. first is the dollar/yen, that's dollar/yen, the chart is pretty much going down on the entire year you see there even though today it is bouncing around a bit, the dollar doing a bit better. 100 is a super significant area to pay attention to in terms of added dollar weakness. and finally, everybody's talking about the pound/dollar today

article 50, all the talk, remember it started out brexit would never happen. then it's they would never trigger article 50. now we see that it's starting to progress. and grant it it's a long runway, but at least the news of the day taking a bit of a toll on the pound versus the dollar. carl, back to you. >> thanks so much, rick. rick santelli. let's get to jackie deangelis at the nymex. check in on the energy complex. >> good morning, carl. oil prices are coming off of session highs closer to the flat line although still in positive territory. wti's trading over 48 and of course brent over 50 was a sign that the market is taking this opec deal positively. still sort of opec overhang here. the idea of this deal is, you know, something that we don't know a lot about right now. kenny on the program earlier brought up a great point, which is that we could wait two months until opec meets in vienna and perhaps not see this deal materialize. but yes this is still the effect opec wanted to support prices going into that late november meeting. some saying that the deal potentially shows that the saudis are cracking at this

point, that low prices have hurt them and this is a sign of weakness coming from the international producers. others are saying, well, look, the saudis want to do this ipo next year and this is the perfect time to try to implement some discipline in the market. but either way still roughly two months before we hear any more news. traders are expecting these prices to stay supported in the upper 40s. but it doesn't really change the supply/demand dynamic at this point. and that's what you really have to remember. still, a step in the right direction. prices, you know, continue to trend towards this $50 mark. back to you, carl. all right. jackie, thank you so much. jackie deangelis. when we come back, markets meet politics. tom mcclellan has a pretty good track record in predicting elections. back after a break.

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watch the markets for your election cues. a big drop in the markets in mid october favors trump in the polls. that's according to the mcclellan market report which correctly predicted the outcome of the past four like.

>> tom, if you take the politics out of it, just look at the charts, what are you seeing in the month of october and the month of november? and does it line up with what

the political cycle is telling you? >> we've been -- most of the rest of the market is not doing that well. that's due to last until about the midpoint of october. and could see a nice final swoon downward to finish out that corrective mode. and then i'm seeing big uptrends after that october and into 2017. but right now october 3rd is not the moment to catch that new uptrend. >> yeah. a lot of variables at play, that's for sure, tom. thanks for the update. look forward to talking to you in the next few weeks, i hope. tom mcclellan, editor of the mcclellan market report. fiat chrysler out with reports, down 1% versus estimated drop of 2.8%. ram truck brand sales up 27%, pickups up 29%. >> all right. as we head to break. let's take a check on the markets here as we are just about 20 minutes into the

trading day. the quarter actually. the dow is down by 88 points. s&p down by 10 or just about half a percent and the nasdaq not far behind that. "squawk on the street" will be right back. stay tuned. anythi worth pursuing hard work and a plan.

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♪ good monday morning. welcome back to "squawk on the street." i'm carl quintanilla along with melissa lee, mike santoli at post nine of the new york stock exchange. financials are weak, keeping a close eye on deutsche and wells. oil also relatively flat. we are getting breaking economic data on a big week for macro. let's get to rick santelli with that. rick. >> all right. we're looking for august read on construction spending looking for something up to 3, 0.4, and last month's now changed is down 0.3. which means awfully quickly we have three negative numbers for the year. and down 0.7 is the weakest since the biggest down of the year, which was april of minus 2.9. all right. let's go to a september read,

shall we? national association of purchasing managers, ism and 51.5 is the september read. 51.5 is actually a bit better than we were looking for. and it puts us back in expansion territory because we did have a 49.4 last month, which was the one, two, third sub-50 read, but we have improved but not all components. we have an employment report this week, so employment tried to move higher from 48.3, but didn't quite make 50. it made 49.7. and if we want to look at prices paid, they are a lateral move of 53, which matches our last look. and new orders didn't make the jump. it jumped 49.1 last look 55.1 this look. so it's a bit of mixup with the ism. all in all it seems to be a bit better on most important levels than we were looking for. and finally, as you look at

yields, they popped over 1.60. we want to continue to pay attention to that. melissa lee, back to you. thank you, rick santelli. we have paired some of our losses here across the board. shares of deutsche bank swinging wildly in the last week and europe and u.s. trade initially plunging to record lows over fear of the bank's stability and strength. wilfred frost joins us now with the latest on this. >> melissa, thanks very much. so what has happened over the weekend? the key thing is no doj settlement has been announced. and friday's move suggested something was, a, imminent, and b, in and around the $5 billion mark. so the focus this week will remain on that possible settlement. and just for some perspective, a few months ago analysts had 2 billion to 3 billion in their models for this particular fine. and it shows how the issues got away from deutsche bank that a $5 billion settlement now would likely be applauded by markets. though not imminent, there are many other litigation cases to be settled. most notable one for russian

money laundering, though that's likely to be pushed through to 2017 now. the other development over the weekend was political. one german politician saying the u.s. was waging economic war on germany, while perhaps more importantly the deputy chancellor and economy minister saying he didn't know whether to laugh or cry since deutsche bank was blaming speculation last week even though their business model, he says, is in fact based on that same speculation. highlights the tough political gauntlet merkel would have to negotiate to deliver any potential bailout if needed. and again why she'll be so desperate for a quick and reasonable settlement between the doj and deutsche bank. so that the bank can then move on from that particular issue to the others that do indeed face them. >> yeah, wolf, interesting dynamic here where it seemed as if perhaps if they had raised capital before getting this final number it would have weakened their negotiating position. so you have to sequence all these dimfferent competing

interests before you get satisfactory resolution. >> i think the reason this has got away from them is because the number leaked, whoever leaked it and whatever motivation, it leaked very, very quickly after this thing was initiated. with the u.s. banks a couple of them did leak, but it was two weeks before the settlement came. so both sides have been negotiating for a while, the number was almost out there, the banks were able to leak through sources. look, it's not going to be that, we're very confident and as you rightly say capital position is much different. that has happened for deutsche. it came out when they hadn't really started negotiations and there was this other thing we talked about last week, the market abuse directive, this law in germany that when "the wall street journal" approached them and said was the initial number you asked for 40 million they had to confirm it and weren't able to say it's definitely going to be lower and soon, that's how it slipped away from them. >> legally do they have to confirm it if it's at the preliminary stages? what's to prevent a journalist from saying, hey, this number is that right. >> so they had to confirm that

the doj had asked for $14 billion. that this letter they got a copy of was a correct letter. in terms of rumors on friday was it 5.4, that was denied. they made no comment to us and short of us saying 5.3, 5.2, by then as well the german -- shut. the market move on friday shulgt suggested they might have something over the weekend. german closed today, so not over yet. if the week continues and we don't have anything out, we're going to start to see that volatility and uncertainty. mr. cryan is flying over for the imf meeting. i'm sure he's going to be working flat out with the doj as opposed to listening to various imf presentations. >> people still trolling press for their report friday saying is that going to turn into a permanent exclusive, as they'd say. >> exactly. i tried every single source i had as well as our colleagues, no one could confirm it. over the weekend i think those traders were expecting it.

a long way to go in the short term to get this deal over the line. but even when that's over the liquidity concerns were not a concern, profitability long term with negative interest rates. >> thank you, wilfred frost. for a look at the markets and what to expect in the fourth quarter, let's bring in chief strategist, and art hogan. guys, pick up with where we were with wilf and that is with deutsche bank. trading down about 3% the adrs. financials flat, just off slightly. we have wells fargo trading at a fresh 52-week low, so the outlier here, art, is it in your view -- are we out of the woods when it comes to the overhangs over financials when it comes to these sort of political issues and systemic risk issues? >> melissa, i think we should be, but we're not. we're nowhere close. remember we're in an election cycle and we're at a point in time where we're questioning

whether we have enough regulation, if not too much. and so to the extent that what hasappe here is whether it's deutsche bank or wells fargo, they sort of reignited that fever you get every election cycle that says, hey, here's an industry that needs more regulation. so that's going to get talked about. they're even talking about, you know, a need for higher capital reserve. so at this point in time the banks look ridiculously cheap and the valuations in a vacuum certainly look attractive, but the problem is we don't know what the next regulatory regime is going to look like. therefore they're cheap for a reason. >> so they're a value trap? >> yeah, they are right now until we know what that's going to look like post election cycle and whether or not this regulation's gone too far and we can actually swing back. but right now doesn't look like it's heading in our direction any time soon. >> jim, as far as the market in general in terms of what's been working and what it might be telling us, i know you've been pointing out that these set of global leading indicators are looking positive. and maybe that's been reflected in exactly what kind of cyclical

groups within our market have been performing. do you think that actually has some legs to it that trend? >> i do, mike. i think that this morning's pmi report here in the united states is an -- another example of manufacturing recovering n. we've had pretty good pmi reports now in the united states, in germany up to like 55, in china. we're starting to see that sector coming back. it would also help if oil popped over $50, again for example. i think there is a global recovery or a global bounce happening. not just in the u.s. but globally that i think will help spur some optimism again. and that's going to come maybe at the same time that earnings momentum finally turns northward. this month could be big. we get not only the first read on what's happening with earnings momentum, but also at month end we get a read on real gdp. if that number's around 3%, we

get good reports to start this earnings season. i think we might break higher here before year end. >> how much higher, jim? you're always the optimist. that's why we love having you on in the mornings. >> well, actually, you know, i've been more conservative here in the last couple years. >> it's true actually. >> yeah. and i turn positive again on the january/february lows. and i have gotten -- i have to admit, increasingly positive since. you know, in the 1980s, the 1990s we had a first-half rally then a pause around fed tightening. that occurred in '83, '84, it occurred in 2004. then we had a second half recovery rally. and i think that's where this is going to mutate into. i think we're going to find out that this may be a slow recovery, but it's long lasting. it's got multiple years ahead. and if it does, we're going to get maybe a second half stock market rally before the next recession. >> brings to mind, art, a note that goldman put out late last

week about '17 arguing there's a risk of the economy overheating, gdp growth, we'll start to talk about classic fed responses to that kind of economy. does that make sense to you? >> well, i'd love to see an economy that overheats. we haven't been anywhere close to that. again, carl, it's interesting in concept, but i have to agree with jim. i think we're early in in the innings of recovery here. i think as we look at all sorts of good things that are happening, we' quietly getting better economic data. we're quietly getting wage price pressure and improvement there. we continue to grow jobs. i think that we've got an abundance of natural gas that's going to help our manufacturing. i certainly think oil's going to stabilize for a period of time here in the $45 to $50 range and we don't worry about that being significant headwind and the dollar stabilized here. so i think we have this slow and stead ri recovery. i think we've gone through a soft patch in the economic data. i think a lot of that had to do with the election and the uncertainty that comes around that timeframe. so i think we get this election cycle behind us, we get a better earnings reporting season and

for the third and fourth quarter i think to jim's point '17 probably looks better than '16. >> jim, if this is a mid cycle pause, we're talking about what a 15-year cycle? don't we already have financial assets that are looking like they're valued as if it's late in the cycle? >> well, i don't know if it's a 15-year cycle, but the longest recovery was around ten years. i think we might surpass that. if you have multiple years left, then there's a good bet that even if earnings grows slowly that there's more upside room in the stock market. and, you know, i think that we went through a fairly severe correction here in the last couple years. we had major corrections in a lot of the cyclical parts of the stock market including as you move down the cap spectrum to mid cap and small cap stocks, we had big corrections in international markets and emerging markets. there's a lot of refreshment that's gone on here, not the least of which is a huge drop in the rate structure, the competitive interest rate against which you judge equities

across the globe. so i think we've set ourselves up with lower rates, lower valuations and now more pessimism. and then we're going to find out that we can sustain maybe a fed tightening cycle and a longer recovery. i like that combination. >> all right, guys, going to leave it there. thanks so much. jim paulsen from wells capital, art hogan from wunderluch. when we come back, the company hillary clinton is calling out today, and former ambassador to germany will join us, his take on deutsche, the state of the economy and a lot more. dow down 63. don't go away. my business was built with passion... but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. with it, i earn unlimited 2% cash back on all of my purchasing. and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business...

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that trump tax bombshell out over the weekend has voters asking questions this morning. our john harwood joins us with the latest. hey, john. >> hey, carl. you know, trump was on defense all last week over the first debate. he was on defense over the weekend about that new disclosure that he took a $900-plus million dollar tax loss in 1995, may have avoided taxes for 15 years after that. he tweeted, he didn't speak directly, but he tweeted out and said i know how to fix this tax code. and his aides say -- or his surrogates including chris christie on fox over the weekend say this doesn't show anything wrong with trump. it shows something wrong with the tax code. >> what it shows is what an absolute mess the federal tax code is. and that's why donald trump is

the person best positioned to fix it. there's no one who's shown more genius in their way to maneuver around the tax code and to rightfully use the laws to do that. and he's already promised in his tax plan to change many of these special interest loopholes and get rid of them so you don't have this kind of situation. >> now, hillary clinton said it doesn't show he's a genius at all. it shows he wasn't very good at business if he took a loss of that magnitude. her surrogates were on the same sunday talk shows making the case that his tax plan would make the situation even worse. >> the key here is how's he going to fix it? well, look at his tax plan. guess who his tax plan benefits? billionaires. his tax plan benefits donald trump. that should be no surprise to anyone since that is the way he sees the world. he doesn't care about those small businesses he didn't pay. he doesn't care about the people who lost millions of dollars in all of his bankruptcies. he cares about donald. >> now, we won't know for a few

days what the polling impact of all this is going to be, but we do have a new national poll out this morning that shows the impact of the debate. it's taken by politico and morning consult, it shows in a two-way race hillary clinton has now opened up a seven-point lead over donald trump. in a four-way race with gary johnson, libertarian, jill stein of the green party, she's up by six, guys. >> john, you know, it's interesting watching stock market reaction for two particular stocks, mylan and wells fargo, both hitting fresh 52-week lows in today's session and hillary clinton is expected to take aim at them once again, in particular, right? >> yes. you know, pretty much everybody's been taking aim at wells fargo and mylan, if you look at the congressional hearings that have occurred recently. but she is going to talk about new proposals to strengthen the hand of consumers when they take on companies they believe have wronged them. in particular, one proposal she's going to outline in ohio, which is a battleground state where donald trump's been doing pretty well, would limit the

ability of companies to force disputes into arbitration, expand the ability of aggrieved consumers go to court and try to prevail there. >> john, thanks for that. we'll talk in a little while. our john harwood in washington. our next guest says the revelations about trump's business losses in the '90s and massive tax implications from it make it imperative for the nominee to release even more recent tax information. pulitzer prize winning author, jim stewart. >> thank you. >> your point makes how skewed to those wealthy and particularly those in real estate. >> i was here saying because of all the breaks real estate developers can get. that said, when i saw those returns and saw aoss of nearly $1 billion, it's lucky i was sitting down. i would have fallen over. i had no idea it could go to that far. so number one, a billion dollar

loss, he's got to exlain that. we've got to see where it came from. that's so big, it raises serious questions about whether he is an astute businessman, number one. and number two, exactly what breaks in the tax code contributed to that massive loss. and we don't know yet. let's assume it's all perfectly legal. but is it aggressive? is it borderline? is it gray area? and is it taking advantage of loopholes that only real estate lobbyists ever got in there in the first place? those are important points. and finally, he said he knows how to fix it. i have pointed out repeatedly that he has not proposed closing a single loophole that benefits him. he has attacked carried interest, he has attacked hedge fund managers, wall street executives, he has not said a word about the provisions from which he benefits, number one real estate developers can take their losses or past losses to -- ordinary income.

not me, not you, not us can do this. >> what's interesting about his surrogates and how they came out over the weekend defending him is they didn't address the notion that perhaps this is proof that he isn't really the businessman he is. they just said he knows the corporate tax code because he's dodged all these taxes. that seemed to be their only defense. which is jaw dropping. >> well, they're throwing the word genius around. >> right. >> wait a minute, genius and billion dollar loss, i'm sorry, do not belong in the same sentence or even paragraph. that is absurd on its face. i think another interesting point is surrogates said he had obligation to take this to shareholders. we're not talking about public company here. this is his individual personal tax. these are losses that flowed through only to him. he did not have to take those losses out of an obligation to shareholders. clear that up. another interesting point, he did have to pay tax in new jersey. i want to go deeper into that new jersey tax code because new jersey at the time did not allow

years of tax loss carried forward and didn't allow real estate to deduct from ordinary income. maybe chris christie should be looking at that. >> this is probably a level of nuance we're probably not going to get to in the broader discussion, but does it give us information about him as a business nan? we knew he went bankruptcy, all these things were kind of out there, this just puts a number on it. is that going to be something i guess carries the conversation from here? >> well, i think so. i mean, look, he's going to say this is all perfectly legal, but there's no getting around the fact that he is in a class maybe of one, that someone could actually slither through a personal and business financial disaster like he did and live to fight another day. now, you can say is that resilience? maybe. but it's also he uniquely benefitted from these provisions that are skewed in favor of people like him. and i think that is -- now, look, there's a reason he didn't release this.

he knows this. i don't care how many times surrogates say he's a genius. if he was a genius, he should have gotten out there, revealed this himself and say this shows how smart i am. by the way, here's what i'm going to do to make it better. he didn't choose to do that. he wouldn't disclose it. >> there's a line in the journal today saying the only thing that's illegal here is the disclosure of his taxes without permission. does the times deserve to be sued if he chooses to do so? >> absolutely not. that law only applies to government officials, number one. and number two, the times got it. you know, someone gave it to the times. and i think if anybody had a duty to anybody, the times had a duty to the public to make this public. it's obviously relevant to the election. >> jim, good seeing you. great read today. jim stewart of "new york times." when we return, is amazon helping its competition? how it may be giving walmart and target a leg up. and take a look at where stocks are trading at this hour. the dow down by about 72 points. s&p down by 9. there's much more ahead on "squawk on the street." stay with us.

amazon may be giving some of its biggest competition a boost online. our courtney reagan joins us

with the details. what's amazon up to, courtney? >> hi there, mike. so we did a test. we ordered the same sets of eight goods, all virtually identical, from amazon, target and walmart, including a pillow, bookshelf, diapers, flip-flops and others. we shipped them todayton, ohio, lincoln, nebraska, san francisco, california, rockville, maryland. we used standard shipping and no memberships. that means no prime, no shipping pass and no red card. our small test uncovered several instances of retail arbitrage, where a third party seller resells merchandise for a profit. here's how it works, small businesses can post items for sale on walmart or amazon's website for exposure to customers who may be looking to purchase the goods. once purchased, a portion of the proceeds goes back to amazon and walmart through fees paid by the seller. now, all four of the bookshelves that we ordered on amazon.com to all four cities from three different third party sellers arrived in packaging with walmart labeling. the amazon seller's prices were on average $15.22 more than

walmart's. there's where the profit comes in. when two of the tide detergents ordered from an amazon.com third party seller arrived in dayton and lincoln, one came in target packaging and had a targetin voice with our shipping address, but a billing address for someone we don't know in south carolina. the other came from walmart, packing slip clearly from walmart and ordered by joe order. once we placed the order on amazon, those third party sellers seemingly bought the detergent from target and walmart and shipped to us. paid $10.26 more than walmart and target's price. interestingly we couldn't buy tide detergent from amazon directly without being prime members. we had to go through third party seller. so prices are low enough at walmart and target, and because some shoppers will pay more for the convenience of shipping an item to their home, walmart and target got the original sale but so did the amazon third party seller, and we ultimately got our goods. melissa. >> interesting look, courtney

reagan, thank you. >> thanks. when we return, former deputy treasury secretary robert kimmitt will join us. "squawk on the street" will be right back after this quick break.

i'm courtney reagan and here's your cnbc news update. residents of haiti and jamaica are preparing for the worst as a powerful category 4 hurricane barrels through the caribbean. sustained winds of 130 miles per hour and expected to dump several feet of rain. well, a spokesperson for kim ckardashian says the reality str was robbed last night in her paris hotel room. the news causing her husband kanye west to abruptly end a new york concert. ♪ >> i'm sorry, i'm sorry, family emergency. i have to stop the show. >> a pair of thieves tied up kardashian and made off with millions worth of jewelry including her wedding ring.

a pair of shootings in downtown minneapolis overnight has left six people injured. the incidents happened 15 minutes apart. one suspect has been arrested, and a gun has been recovered. it's unclear if the two shootings are related. and hillary clinton picking up an endorsement in the battleground state of ohio. lebron james in an op-ed today says he's voting for the former secretary of state. the king is for her. that's our cnbc news update for now. back over to you, carl. court, thanks so much. deutsche bank's john cryan receiving some renewed criticism over the weekend. german economic minister and vice chancellor calling out the ceo over the bank's fears of market speculation. so what will germany's response be to the deutsche turmoil? joining us this morning is former deputy u.s. treasury secretary and former ambassador to germany bob kimmitt. mr. ambassador, good to have you back. >> thank you, carl. good to see you. >> how is this being talked about in the halls of germany right now? >> well, first, today let's wish the german people happy

unification day. for those of us what grew up in the cold war, it is still hard to believe that germany has been unified for over a quarter century. but deutsche bank is very much on the minds of people. there was polling data out of germany this weekend showing two-thirds of the german people oppose any state bailout of deutsche bank. and as you said, the economics minister vice chancellor and head of the opposition party was quite critical of the bank and mr. cryan while at the same time saying he was very supportive of the workers there. so it is a major topic, but i would say also a topic that leads nicely into the world bank imf meetings that are taking place in washington this week. >> whatt incentive does the doj have to negotiate on that settlement? >> well, i think the department of justice is a very professional organization. they have clearly the attention and engagement of deutsche bank.

i think both parties have an interest in bringing this to closure. it's been a long running investigation. i think the time has come in the minds of both to come to closure and it would be quite good news, i think, for deutsche bank, as well as for the u.s. government, to bring it to closure perhaps with some important conversations this week. while the deutsche bank leadership is in town for the bank fund meetings. >> if the settlement is north of $5 billion, mr. ambassador, i mean, this really becomes a gigantic headache for angela merkel, doesn't it? i mean, there's not the will of the people to support any sort of bail in, bailout measure. and at the same time this becomes a giant political issue for her in 2017. she's sort of stuck between a rock and hard place. >> i think it is a political issue, but at the same time it's an issue first and foremost that deutsche bank has to grapple with. they have a number of options available to them including asset sales, capital raising and other steps that could be taken. i think that reaching agreement

with the department of justice would send a strong signal to the markets. also i think it's important for deutsche bank first and foremost before talking about any governments to lay out what its strategic plan is going forward. >> ambassador, let's assume that deutsche bank gets past this, maybe gets a manageable settlement, perhaps raises some capital and essentially dodges this bullet for now. you mentioned that the public in germany is very much against any direct aid to deutsche bank. does this actually start a process of figuring out exactly how to treat the very large banks in germany whether it is some kind of a breakup scenario or other provisions that might be considered just to have them on better footing down the road? >> that dialogue has been going on for quite some time. you recall it really began in earnest during the global financial crisis, which then moved to europe. there's been quite a bit of debate not just in berlin, but also in brussels on that subject. yes, i think it will accelerate discussion within europe, but

also between europe, the united states and i would say more broadly among g20 partners. one thing that i would note is that the g20 played a very critical role in coming out of the global economic crisis, largely in 2008 and 2009. thereafter a lot of people have questioned what the role of the g20 is, and they have moved very aggressively, that is the g20, to argue for enforcement and compliance actions both against illegal funds transfers, also taxization and things of this sort. so i would say, yes, in germany that dialogue needs to accelerate within europe. but i think also on a transatlantic global basis. >> mr. ambassador, i'm wondering the sort of twin crisis element between deutsche and germany, wells here have dovetailed at such an amazing time weeks ahead of the election. i just wonder if you think it fuels the argument for stricter regulation, higher capital standards, even breaking banks up more than it has been since

the crisis. >> that series of points that you raise, carl, is obviously very much part of the discussion in the u.s. presidential campaign. i would say it is also very much part of the discussion in europe as europe looks forward to important elections next year both in france and in germany. but i would say that drawing the link between wells and deutsche i think is drawing it a little bit too tightly. and what i would say is each of those banks has issues that they have to deal with and deal with directly. i think it's important for them also though to make sure that people understand what their assets are going into this. in the case of deutsche, $250 billion in ready liquidity, $600 billion in customer deposits. they have troubles, they need to lay out a path going forward. but, yes, it is going to be in the context of that broader political discussion both in the u.s., europe and i would say globally particularly in the g20.

>> mr. ambassador, good talk, good insight on a week where we're paying a lot of attention to both companies. thanks so much. >> thank you. >> ambassador bob kimmitt joining us from d.c. as we take a look at shares of tesla, shares rallying after company reported best quarterly sales on record. take a look at stocks overall, plus the flat line. we've got minor losses on the board. the dow down 61 points. much more ahead on "squawk on the street." stay with us.

what two might be best bets for the quarter? two traders make their picks at tradingnation.cnbc.com. more "squawk on the street" coming up.

welcome back to "squawk on the street." i'm kate rogers. stocks are modestly lower following friday's rally. the utilities sector is off by about 1%, the biggest laggard in the s&p 500. among the names weighing on the

sector are first energy, center point energy, aes leading declines down more than 3% after ubs downgraded the stock to sell from neutral citing valuation. the utilities sector though is one of the year's leading sectors with gains of about 12% so far in 2016. melissa, back over to you. thank you, kate rogers. now let's get to the cme group. rick santelli with the santelli exchange. rick. >> good morning, melissa lee. i like to welcome my guest andy johnson, in person, nice to see you again, andy. so, andy, as i look up, we've shaved quite a few points off the dow now down only 64. what do you think of the global and domestic economy for 2016 thus far? surprises and things you expected. >> well, look, the economy's definitely been weaker than i thought. the last few quarters have been less than 2%. actually, less than 1.5%, i didn't expect that. but i think going forward the economy's going to be strong. the consumer's strong. manufacturing is weak of course, but i think the consumer will carry the day. >> now, you think the consumer's

strong. give me just one area that you are looking at to arrive at that conclusion? >> well, wages are up. confidence is up. and the savings rate is actually very high. so that could provide a tailwind if the consumer really starts to want to unwind and spend. >> but from a fed perspective, let's look at the other side of the ledger. a higher savings rate at a time where they're talking about getting rid of currency, negative interest rates in europe and japan. savings is not anything the puppet masters want to see, andy, is it? >> no, they don't. in my opinion lowering rates forces people to save for longer because they have to save for retirement because returns are so low. >> which is the opposite of m.i.t. models when they starleted cranking and putting gears into motion. you believe compared to consumer is on the weak side. what's your billboard for why the business side is weaker?

>> gdp is low and that's what lubricates business. until we get higher nominal gdp, i think we'll see that. in the multisector bond funds we're respectful of that and we've increased our duration. >> okay. increasing duration out there is the sensitivity of portfolio's extending. so the shortest maturities have the least volatile nature once you incorporate them in your portfolio, the longer maybe your portfolio much more aggressive. so you've extended. give me the exact point from i think a little less than three years to -- >> yeah, so at the beginning of the year because we were -- we thought the fed was going to go on a tightening path and of course they aborted that. >> which would have brought more volatility. >> of course. we were about a year and a half short of our bogey, about four years duration. now we're about five, 5.5. so we're much closer. not that we like rates. rates are way too low. we have to be flexible. flexibility is the key. what we've done is be flexible when the facts change.

>> so you want to make money, but you don't want to get run over doing it. and your extending duration actually goes along with what i've seen in the markets, which is very tight trading ranges, does it not? >> absolutely. i mean, treasuries have been in very tight range. 1.5 to 1.75 for much of the year. we don't think we'll break out of that aggressively. fair value for the 10-year is probably 2%. i don't see us getting there any time soon because the market simply does not believe that the fed's going to deliver on this promise. >> just about out of time. if the fed did deliver an after-election, after the two-term president is done they raise for the second time in ten years, extended duration at that point might not be a good thing. your final comment. >> absolutely. so, again, we're timers, we're flexible. and what we would do is we would really shorten our duration aggressively. so it's all about timing. you can't be -- as you know being an old trader, you never fall in love with your positions. the prices are what matter. >> andy, it's been a pleasure.

thanks for your viewpoints and strategies. mike, back to you. >> rick, thank you very much. appreciate it. when we come back nutanix soaring making best ipo up again today. will this open the flood gates for more ipos? we'll break that down straight ahead. here i am... building a jet engine. we've been hearing so much about how you're a digital company,

so you can see our confusion. ge is an industrial company that actually builds world-changing machines. machines that can also communicate digitally. like robots. did you build that robot? that's not a robot, that's my coworker earl. he builds jet engines with his human hands. what about that robot? that is a vending machine, ricky. john, give him a dollar.

there have been 75 ipos so far this year. that's down from 140 at this point last year. so what's on tap for the ipo market in the fourth quarter? our bob pisani joins us with more on what to expect. hey, bob. >> hopefully a lot more tech. nutanix was a big hit on friday. so this dearth of ipos mike is talking about has been offset by positive news recently. the average ipo is outperforming those 75 ipos are up an average of 41%, 83%, that's the most important number is trading above their ipo price. now, that's according to renaissance capital.

the recent ipos have also done well. nutanix friday that was the best performer of the year. others including novan, trade desk, e.l.f. beauty, all have done really well. these are big returns, even valvoline hardly a growth stock had respectable move up from initial price about 7%. this week's offers include coupa software, a cloud based platform connecting businesses with suppliers. a lot of tech stuff coming. down the road here the successive nutanix may encourage some other smaller unicorns to go public. should be seeing a lot of tech in the next couple of months. so carbon black which makes antivirus software to prevent cyber attacks reportedly filed for an ipo confidentially. that may or may not mean they're going public any time soon. black line, financial reporting subscription service just filed for ipo. that road show should start in a couple of weeks. other potential unicorns include blue apron, they make packaged

ingredients for home meal preparation. millennials love them. appnexus, bidding platform, pr for creating a quote for the customer and do all the invoicing, then forescout, which does enterprise network access, they monitor devices connected to your system. all of this, of course, guys depends on how well the markets do. as you know, mike, you've been talking about it today, october traditionally the most volatile month of the year, a lot of the swings in the 1% or more f the s&p 500 and it is a narrow window, because the presidential election generally ipos shut down immediately before and often for a couple weeks after that process, so if you got all these ipos sitting there and the markets are holding up, there's pressure for them to come as soon as possible, so i hope to see a lot of particularly tech ipos in the next few weeks. >> market conditions are important, but also the appetite

for growth within the market seems to be strong and that seems to be fuelling the desire for ownership ipos. >> the key is some kind of growth, that's what helps and that's what helped nutanix. they may not be making a lot of money, but they have very, very strong growth and people willing to pay up for growth in the market. >> not just for the growth. what's interesting is, no ipos in index. if you start to get the ipos rolling, those that have inflows, they need that to outpace benchmarks. >> you'll see a lot of that in the next few months and what i hope is there's 100 unicorns out there. we're not just sitting on the biggest names. not uber. the ones i just showed you, many smaller companies that are out there that are right on the cusp that could potentially go right now. and that's what i'm hopeful i might see ten, 12, 15 before the end of the year. i'm talking unicorns. >> also hoping to get in the window before a big unicorn goes.

that's going to suck the air out of the room, so to speak. >> alibaba, there's not an uber. >> not necessarily. >> not an airbnb. nutanix was big and that was a unicorn, so i think there's room for a number of these, as long as you show some kind of growth. >> none of the hot specialty consumer things. >> valvoline is up. >> thanks, bob. we've got some new updates on the spacex rocket that exploded next month. morgan brennan joins us with more. >> sabotage has surfaced into the investigation what caused a falcon 9 rocket to explode. "the washington post" reporting spacex officials saw some images, according to that

report, spacex trying to investigate, but ula called in air force officials who inspected the roof and didn't find anything. in response to the report, spacex saying, "the accident investigation team has an obligation to consider all possible causes of the anomaly and we aren't commenting on any specific potential cause until the investigation is complete." a ula has not responded to requests for comment. the falcon 9 exploded on the launch pad early last month and so far spacex knows there was a breach in the system that's used to pressurize theiquid oxygen tank, but that the cause is still unknown with just last week ceo elon musk saying we eliminated the obvious possibilities for what occurs there, so what remains are the less probable answers. but all of this, it highlights fierce competition between spacex and ula, which is a 2006 lockheed and boeing. ula essentially had a monopoly on government space contracts.

spacex sued for the right to compete, they won certification last year and have been snagging some nasa business. so despite not knowing what caused the recent explosion, spacex is saying it still plans falcon 9 launch as soon as next month, but the sabotage reports certainly interesting and getting a lot of attention right now, melissa? >> certainly getting the attention of elon humusk, who's been very involved when the initial report of the explosion happened, it caused a delay in the blog update we were going to get on autopilot, so when you think of something going on with spacex, you think is this a distraction, another distraction for elon musk, who's trying to deliver cars and finish up the solar city deal, which has come up for a vote in the coming weeks. >> that's certainly something folks on the street have been talking about. what i will say, and we have seen this with spacex even before the explosion, is much like you can make the argument tesla or in some cases solar city, there's been a lot of

overpromising and underdelivering, so it wilbe really interesting to see in the case of spacex whether they'll start launching falcon 9s into space before the end of this year. what we know from past situations, ula chief executive saying this just a couple weeks ago, after an explosion like this, it can take up to nine months, even a year before we see rockets launched again, so very ambitious plans to get back in space soon. >> all right, morgan, thank you. morgan brennan with the very latest on the falcon rocket explosion. take a look at the markets, what they are doing here as we approach 11:00. we're off the lows a bit. got that better than expected ism number. dow is down just under 50 points right now. it was down more than 100 at the lows. seems the industrial sector in particular did lift. you see the nasdaq, obviously, been the leader for some time now. >> all right. although not a barn burner of a number, back to 515. new orders, i think maybe caught some people by surprise. >> that's been the trend.

you have to have the orders doing better, durable goods, as well, better than delivery, so seems as if maybe again the market is trying to sniff out some heavy equipment and capital spending spurt. >> yeah, and, of course, people watch mylan, as well as wells fargo, could be under the sights of hillary rodham clinton today in a campaign stop in ohio, both stops ahead of that hitting fresh 52-week lousews. we still have mylan down by a good 1.6%. okay, let's send it over to john with a look at what's coming up on "squawk alley." john? >> good morning. it's been a heck of a month for go pro, the stock up around 30% from its lows just last month. we're going to have the ceo and founder join us to talk about new cameras and drones. also we're going to continue to dig into tesla with its deliveries going well. what are the next hurdles. and facebook, different strategy in immerse, all that and more coming up on "squawk

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good morning, it's 8:00 a.m. at tesla head yauquarters in pa alto, and "squawk alley" is live.

welcome to "squawk alley" for a monday morning, john ford along with seema modi, also joining us today, roger, great to have you as we kick off october and the fourth quarter. we begin with tesla this morning posting its best sales quarters ever, reporting double the same quarter last year. the new numbers suggest the fatal crash in florida regarding the autopilot feature did not have much of an impact on sales. tesla is still in the midst of a merger with solar city, but you're in tesla country out e,