i used to it's wednesday, october 12, 2016. "squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box." >> good morning. welcome to "squawk box" on cnbc. i'm melissa lee, along with joe kernen. u.s. equity futures, a hangover from yesterday. a selloff as joe mentioned. we're set for a higher open on the s&p 500 and the nasdaq. slightly lower on the dow jones. over in asia, you can see the impact, the nikkei down more than 1%. hang seng down by 0.6. shanghai unchanged. the trade in crude oil, we are -- let's look at the european markets here. a mixed bag. dax, cac and the ftse 100 pointing to the down side. now crude oil, trading higher. wti up by 20 cents a barrel.

50.99. of course it was the rise in rates, the rise in the dollar yesterday that really took stocks down. >> it did. you know, the fed -- tell you what i'm looking up right now. >> are you on facebook? >> no, looking up a quick nate silver. there's different places to look. you can look at the betting markets on the election. but the now cast nate silver is almost 90% for a hillary clinton win. above 80 in the polls. that whole narrative that the market goes up when it looks like hillary clinton is going to win. we've done it here on cnbc. people saying they've seen this trend. i don't know what happened yesterday. i think it -- also, if you start to believe the senate and the house could both go because of the rifts in the gop, i'm not sure any of this has to do with the 200 points.

i didn't think it does. if you're looking to tie anything to the election, there's something in it for everyone. you could say now if it was undivided government, you had a hillary clinton presidency in both houses of congress, the market theoretically, if you believe that those policies are good, it should be soaring. >> should be. >> you can see the reaction in healthcare. healthcare, a huge downturn yesterday. >> banks. >> banks. any sector with a risk of increased regulation. that was perceived strongly. >> or as simple as alcoa and honeywell. the strong dollar. the dollar index, it wasn't supposed to do this. >> a 1% move week to date is unheard of. >> if oil goes up, the market is supposed to go up. what happened to that correlation. this is a dollar correlation now. >> dollar rates. >> that's why when we say the fed is at 60% for december, one day can get me thinking they're not going to do it how many days

until december? >> that one day may be today with the fomc minutes. in terms of market fluctuations, dollar strengthening, bad outlooks for multinationals, all those things could throw these guys off track again. >> absolutely. there's going to be a kitchen sink quarter for a lot of companies. >> now if the market is supposed to rally if the fed puts off the december rate increase. one day it will be based on having an economy strong enough to withstand another quarter point. >> one day. >> i think that was -- oh. it is today's top story. we just kind of talked about it. it wasn't in the teleprompter. big currency move. sterling staged a rally overnight. it hit a three-month high against the dollar. this after the british prime minister theresa may made a concession to parliament offering to bet lawmakers --

really? the pound is at a three-month high now? or at a three-month -- i thought the pound was getting weaker. lawmakers will vote on the brexit plan. that won't stop britain's withdrawal. it gives lawmakers who want to stay close to the eu more power. china's central bank guided the yuan lower today for the sixth straight session. it sits at its lowest level against the dollar since 2010. minutes of the latest fomc meet be will be replaced this afternoon. and two fed presidents are speaking today. just one notable earnings report today. railroad operator csx will report after the close. in corporate news, shares of m samsu samsung, slashing profits bay

third following the galaxy note 7 recall. they are cutting the target for the year. other stocks to watch today, ericsson taking a hit after the firm issued a profit warning, this coming a week after the telecom equipment firm announced plans to slash 20% of its domestic work force. shares of barracuda networks reporting a rise if profits. its ceo will join us at 8:40 a.m. eastern time. and sames of fortinet slashing its outlook. preliminary results for the q3, revenue well below the street's target. the stock falling 13.5% in extended hours. amazon is launching a paid music service today that will cost $8 a month for prime members or $80 for the year if you buy an annual subscription. non-prime members will pay $10 a

month, owners of the echo device will pay $4 a month for a version of that service that only works on that device. amazon already launched prime music, that only has about 2 million songs. the new service will have tens of millions of tunes. they want to get bigger into the grocery business. >> it's interesting because you look at all the grocery operators, you look at what target said about the grocery business, you wonder is that a good business right now to be in with with food deflation? >> i always liked looking at yearly revenue for a supermarket chain and yearly profits. if you want to see the slimmest margins in the world, sometimes less than 1%, you have to sell so much stuff. then you think, amazon is already in position to distribute all this stuff. to have it, distribute it, and it wouldn't take much to stick it there. >> already a logistics company. >> exactly.

it would add to revenue, anybody that prices a stock priced to revenue would like it. it makes sense because they're in position to do it. doesn't seem like a good business. >> we touted apple's ecosystem for so long, they get you in. it's so easy. everything is linked. now with echo. you say alexa, send me paper towels and lettuce. >> i'm scared of alexa. >> i'm scared of alexa too. >> why are you sarcared of alex? >> hot mike. >> i have alexa -- >> you have one. >> we got it, we haven't set it up. i'm worried that we haven't even set it up that it's listening. >> that's paranoia. >> how do you know? >> it's not plugged in, joseph. >> i don't talk around it. up in the attic, i'm worried. markets seeing red.

investors will get a sense of fed sentiment with the release of the fomc minutes later today. joining guys, great to have you with us. steven, starting off with you. the fed meeting was the most dissent at a fed meeting in about five years. is anything in the release going to change our expectations for a fed hike in december? >> it's doubtful it will change for december, but three dissents is hard to keep this going without taking action. there was no mention of this around the fomc meeting, but we had weak data in august. things looked marginally better in september. rates have been moving up around the world. correlations between equities and rates up near 80%.

we're getting hit badly in sectors like utilities, everything that is bond equivalent. where it is with this exhausts bond market trend is lots of anxiety about rates. moves into the exchange rate as well. >> we've seen the rotation in technology, strongly in the third quarter, does that continue? are we getting to a point where valuations are a concern? >> what we've seen is earnings are not as good as people think. the industrials, a few healthcare companies. i would be surprised if we're looking at a rate rise ahead of an election. we didn't do it before brexit, why would we do it here? maybe we do it in december. i think the global interest rate markets are self-correcting, helping us self-correct. that mechanism has been in place all year.

>> self-correct in terms of we're already seeing the move in stocks and bonds and asset classes in anticipation of that hike now. >> you're seeing the german yields going up, ours are moving up. we've been where we are in the market because of the global interest rates. it's put pressure down on volatility which allowed expansion and pes. if that reverses we could be in for correction which is good. have cash on the sidelines. if you have the ability to short, good time to have that out there. >> lower interest rates, lower return expectations, just stability alone has been enough for the market. when i had interest rates get to ever lower levels outside the united states and very little spillover to domestic interest rates, not getting to new lows on interest rates, those sectors dependentshgs it, utilities a prime example.

look at the price of gold, dollar, all the exact same trade. >> people point to evaluations being high across the board. the s&p 500 is varied. a stat put out yesterday saying forward pes on the s&p 500 are back at bubble levels. >> try bonds. they're among the highest yielding government bonds around the world. so the point is that unless you get a catalyst, unless you get a breakdown in the economy, if earnings may be looking bad for a couple of companies so far, i think with what's happened to petroleum, we are about to see a resumption of broad, if moderate gains in the market. that's where we stand on third quarter and beyond. >> even though we've gotten -- to chris's yoinpoint, we got

negative reports, reads on the broader economy, right? >> it's early in the reporting quarter. we had upside surprises for the quarter past every single quarter since the third quarter of 2009. we see the potential for some resumption of earnings growth. >> you said it's a good time to short. where? >> we like broad market shorts with some companies that we think have bad management. so we have those positions on. to your question earlier on growth. i agree on energy. i think that is a bright spot. what we're watching in the small cap world is the high yield markets. those have not collapsed. last year that was pressure. that's a relative trade for small cap companies, the high yield market. that's been holding up. we think there's value in the small cap universe. multiples at the s&p 500 are

probably more stretched. small cap has been an ignored area. volumes have dried up because of dodd-frank. there has not been as much -- >> so there's value to the upside in small caps but short on the broader markets? >> for any sort of dislocation we could be coming into. we have the election season. probably a higher probability for greater volatility coming. >> guys, thank you. yum china splitting off from yum brands at the end of this month. china about to get its first taco bell. god, i love taco bell. >> do you? >> which kooind ind of -- what you order? >> as much as i can -- you can order the whole menu for 495 -- >> $495? >> you never -- seriously, you can get six tacos, a burrito, you get the bill, it's like $5. >> oh. >> does it come with tums?

>> i don't want negative -- the worst mexican food is great. all right, susan. >> hi. >> how are you? >> good to see you. yum is -- end of this month they should get done doing this split. we have the ceo. >> yes. >> you knew that? >> yes. >> you were up to speed. >> we had yum china's ceo on "power lunch" yesterday. looks like they convinced the markets that the split is a good idea. so taco bell will have a soft opening at the end of this year, and let's see what they mentioned at investor analyst day. they are splitting off the china division. in a down market, they have outperformance. when i say asset-light, they don't want to own the restaurants anymore. they want to be a steward of the core brands, kfc, taco bell and

pizza hut. that means moving to a 98% franchising model, less than burger king and duncan brands and more than mcdonalds. when you own less assets, you don't need to spend as much. as a result they're slashing capital spending by 80%. reducing general administrative costs and that comes with job losses. 600 corporate jobs will go by the end of this year. 1500 additional by the end of 2018. as a result of freeing up this cash with the cost cuts, yum is returning it back to shareholders, doubling capital returns to $13.5 billion by 2019, and targeting total returns in the mid teens over the next three years. analysts remain bullish on the stock. a lot of noted s say they consir yum one of the top picks in the restaurant space and that those numbers may be conservative and

they may exceed that over the next few years. >> did they talk about kip chipotle's woes? >> no, they were focused about their own financials and their own strategy going forward. taco bell has been doing well in the u.s. the $1 burrito breakfast menu la been working. thanks to joe and the like. >> then they come up with things like covered with fritos. i don't think it's a good idea to gloat too much about chipotle, because taco bell at one point had some similar things, similar food safety issues. also there was some hedge fund that said they weren't using meat or something. >> yeah. so the yum china ceo said bringing taco bell to china won't be easy, especially in a country with fresh quality issues. >> all you need is one taste.

one taste and you're hooked. i got hooked in college. i never had mexican food. >> mexican food. that was your first experience? >> yes. in colorado. almost reminds me of apple. shouldn't gloat too much about the samsung 7 either. think if something like that were to happen with the number of phones out there. there's no reason to think it would with apple. but you do need to power these things. stuff happens. i don't think they should gloat. >> especially using other peoples parts in your phones. >> and you have that many out there. that's frightening to me. sorry. >> the notion of opening a taco bell in china. you asked the question yesterday, who in china wants to eat taco bell. >> they'll start with two in shanghai. >> i don't see why once you try it why everyone wouldn't love it? >> it's such a universally

delicious taste? >> is. >> pizza. things go around the world. >> that's true. good point. >> i bet they have good chinese restaurants in mexico. >> perhaps. >> perhaps. >> i'm open to that. >> question mark. >> see how i think? can't get that anywhere. thank you, susan li. as we said, greg creed will join us at 8:00 a.m. eastern. he has some answers on why taco bell will work in china. if he doesn't, you have me. >> you are the brand ambassador. if you had to rank the brands? >> taco bell number one. taco bell number three. taco bell, repeating number one and two. >> all three. >> i like them all. i do. haven't been to pizza hut in a while. love pizza. in other fast food news, the creepy clown craze in america is

taking its tool on a familiar mascot. we thought about this before we heard about it. ronald mcdonald is limiting public appearance of the spokes clown. the move comes after a series of sinister clown sightings across america. we used to have some fun with it. it's not fun right now. we used to show -- some video of ronald, and we would put it on a green scene behind us. >> right. >> and you would look around at him and go, wow, that's creepy. now it really is creepy. >> i thought it was creepy before. >> you did. >> you look at most of these mascots, they're creepy in general. >> how about that burger king guy. >> he's creepy. >> you have to wonder if hamburgaler and grimace -- if it's their time to shine. lean on the other characters. >> i was off clowns after the movie "it."

i can't. >> it's like "chucky 2" a dom but not a clown. >> especially with the melting makeup. not good up close. combing up, politics in poe cus focus. we'll get a live report from greene county, pennsylvania after this break.

welcome back to "squawk box." to politics, with 27 days left until voters go to the polls, hillary clinton is pulling ahead in one key swing state and that is the one that's - did i know it's right -- it's south of here or west. >> pennsylvania in. >> it's right there. >> a neighboring state. >> that's what i was -- that's a quick way of saying it. >> right there? >> a fast way of describing where it is. contessa brewer joins us now. she knew that, i bet, from greene county, pennsylvania. an area that could be critical for the swing states. i know it's in the same vicinity

of new jersey, contessa. i knew that. >> you were close, joe. greene county is home to half of all the coal production in the state of pennsylvania. and yet the emerald mine behind me shut down last year, roughly 300 workers laid off. many of those are registered democrats, but they're fed up and they're voting for trump. in fact, in little waynesburg, a tiny town here, the shops along main street depend on the income from these coal miners. they support four jobs with their earnings from the mines. for every miner. when the miner suffer everything from the sale of steel toe boots to new car sales suffers. >> hillary clinton is saying i don't want to leave coal workers behind. i'll put $30 billion towards retraining them and moving them to new jobs in clean energy industries. do you buy that? >> no, i don't. >> why not? >> i don't buy that?

>> you're talking political b l bull. if hillary clinton was standing here, i would stand up and turn my back to her. >> but you're a democrat. >> i know i'm a democrat, but she's a liar. >> well, the miners really like that trump digs coal. that's a simple slogan. you see it posted on campaign buttons and t-shirts around town. in fact, the local businesses pump trump. you can see the support in the yards around town. you would be hard pressed to find a hillary clinton campaign poster around here or any boost in newly registered democrats. >> i think it's been - it's a little more challenges some of those areas. we've seen a big influx in more of our urban areas, more of the densely populated areas where we have more millennials moving in here to work at the high-tech indi industries of google, uber and

lyft. >> clinton is counting on turnout in philadelphia and pittsburgh in the urban areas, but not counting out the coal counties. she's trying to reassure folks with her promises of job retraining and pointing out that trump talks big on steel, too, yet he imported steel from china. i talked to a lot of laid off miners yesterday, none of the trump supporters i spoke to were convinced by hillary clinton's arguments. >> wow, that's interesting. you know, pittsburgh and philly probably dictate which way that state goes. don't you think, contessa? >> well, the thing is that they have a growth of population. so if the young people, if these millenniums that they're counting on do turn out and vote. it's probably going to be a big win for hillary clinton. right now the most recent polling done in pennsylvania, this was before the release of that tape, but it shows clinton with a sizable lead.

8.6 over donald trump. >> i was looking at this on my iphone earlier. i can easily get -- doesn't look good at all for donald trump. let me see. real easy to get these things, contessa. chance of winning pennsylvania, as of today for hillary clinton, 90.1. donald trump 9.9 on nate silver. 28 days, who knows. 27. keeps changing. i get comfortable saying 28, then next day it's like 27. this is like me knowing where pennsylvania is, too. thank you. great to see you again. we'll see you in -- this is good. i like this. we go way back. i'll see you in the studio again to soon. can corporate profits reverse a year over year slump? the forecast coming up.

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i thought at one point yesterday it was going to get uglier. were you watching in. >> tick by tick. >> i saw 250. did you see 250? did it get that low or 230? >> i don't think it got that low. i think it was 240. when the dollar index was down, at one point more than 0.8 -- >> dollar was up or down? >> up more than 0.8%, i thought that will be trouble. >> oh. we'll see how this -- i love the fed. i'm sick of talking about them, but i love -- one day like that. when it's dollar induced. i any they're sitting there -- do you know how -- how do you hand wringing? you do it like this? >> i think like this. >> how is it? is it like this? >> i don't know what this is. >> how many are there? i think -- i thank you all at once they go, okay, set, they all go -- december, did we check, did it move on the fed

funds thing? >> was up to 63%. >> you think it's 60%, 63%? >> might be a bit lower. >> they guaranteed there would be another one this year. luckily, nice that they waited. they got one more chance. they feel like they have to do it, right? they probably -- it would be fine probably. >> the market is already reacting to it. what's the big deal if they actually do it. >> maybe they actually well. nice we have no idea and they have no credibility. yeah. oh. oh. oh. >> lpl finally exploring a sale of the firm. they are the largest independent broker deal and investment adviser in the u.s. this as they deal with the lower interest rate environment and regulatory compliance which has resulted in lower commissions. joe? now to sports. the cubs clinching a ticket to the national league championship

series. a magical season for chicago. last night was no exception. the cubs trailed the giants 5-2 in the ninth. in the ninth. and it looked like they were home. this would be -- maybe not. yeah. okay. wow, that's amazing. yeah. any way, they rallied with four run against the giants bullpen to win. i saw bob newhart, 87 years old, a cubs fan. people have been waiting, like, 87 years. he's a funny guy. cubs fans waiting a long time. long time. it's not done yet, but a good start. last year people were hopeful. then it didn't happen. the mets, i think, got in their way. >> always hopeful. >> all right. i was saying that baseball has

gotten more local. >> you don't watch it anymore, you said, or not as much. >> the reds, i would watch much more, but it's not like the nfl. nfl has its own problems. i wish it didn't. down double digits in a lot of markets. >> yeah. >> millenniamillennial. >> you're not a millennial. not saying that you're not. i got a mike on. i'm afraid. earnings season kicks off on friday. we get reports from jpmorgan, citi group and more. for more, we are joined by christine short, senior vice president at estimize. i did not like the start to earnings season so far. >> i don't think a lot of investors did. here we are again, kicking off on a sour note with alcoa yesterday. i don't think they're much of a

bellwether. >> when was honeywell, last week? >> yes. that's more concerning. the industrials have seen downward revisions, after honeywell, a lot of industrial names giving warnings that this season won't be great. don't expect 2017 to be much better. i take guidance with the grain of salt. we know what the company's goals are. the goal is to get analysts to reduce estimates so they can see a pop in the stocks. never quite as bad as you think it will be, but certainly people were unhappy with it. the bright spot this season is that we night get some revenue growth. for the last five quarters, the s&p 500 has seen sales decline. this quarter we're looking for a 2.5% pop. that would be an end to the revenue session. earnings session still on the table. >> an end to the revenue session

until next quarter. >> you will see the same issues we've seen over the last six quarters resurface here. one being the strong dollar. we've seen some mention of that in press releases, softening global economy. oil prices. so a lot of these -- >> oil's good. that used to be bad. used to weigh on energy. >> q3 on a year over year basis, slightly weaker. wti about $5 off. this was supposed to be the big quarter that energy earnings came back. year over year comparisons were supposed to be easier. revenues down about 12%. earnings still the really big laggard. >> if we get near 60 we can cory about the consumer being negatively impacted. >> then nobody is going out and shopping. >> seems like we didn't get the benefit of the consumer with oil prices. we'll hear how bad it is when it goes back up. >> you know, consumer has been fairly healthy, but you have a value focused consumer.

they're being choosey how they spend their money. which is why you're seeing discounters and fast food rauch restaurants do well. >> taco bell, $5. you can get the whole menu for $5. >> that's what people are looking for, especially with fast food places going the organic way. the chipotles of the way where you could get the fresh food, now you can get that other places, and the consumer is zoning in. >> the performance of technology in the third quarter was stellar. will that be backed up by earnings? >> i think so. it's the third leader of this quarter behind healthcare and consumer discretionary. technology is a sector, you come into this season, it looks weaker than it ends up being. last quarter about 75% of companies beating. technology looking strong. enterprise technology specifically. healthcare and consumer

discretionary, those are leaders, and forediffere differ reasons. healthcare was the darling of the last quarter, now it's a laggard. about 20 million people in the u.s. are insured now, we have an aging population, pharma companies have strong pricing power, robust pipelines. then within consumer discretionary. not the autos anymore. those are dropped off. ford will be miserable this quarter. so looking at auto components taking the lead there. some other sectors as well including household and durables. people investing in properties. >> confidence is okay, right? that's a bright spot. >> consumer confidence is okay, but they're just being picky with how they ail gate tllocate. >> watching yesterday with this election, you have trump, the

tape, paul ryan, that's just ugly there. the rift in the gop party. then on the other side, our other candidate, you have the wikileaks, reading stuff about how americans are stupid, we have to keep them in the dark. these are our two choices. it just felt so -- sort of disconsolate. >> alcoa almost got too much blame the other day. i think some of this -- you can't -- >> re-election jitters. >> of either one. >> we'll get one or the other. >> either joychoice -- >> jfk is not riding in on a horse to save us. >> do you think this is an earnings season where people will be looking through the earnings, to the role of politics and how things trade, healthcare is supposed to ab leader, and they're beaten down. every time hillary clinton pulls ahead in the polls, it seems

like biotech gets hammered. >> all leads back to that tweet earlier this year. certain seshgts will be better for certain candidates. the healthcare sector probably doesn't want hillary. aerospace and defense, that's -- whoever gets the next defense contract. >> think of the capital gains, her tax plains, if they were to come in front of of a democratic congress. both houses. they'd go. capital gains would go up to whatever she's talking about. a lot of money. >> people don't know what trump will do. they have more of an idea what hillary will do. trump at this point, that's certainly why -- >> one wants to raise taxes. one wants to lower taxes. we may not know how it will work, but -- i think there's something to the notion that people do -- they did a pom where not as many people like divided government as in the past, but i think financial markets are not that

uncomfortable with divided government. that looks like it's not going to bthe case increasingly. we don't know yet. who knows. these polls, probability, betting markets. it all worked great with the brexit. thank you. >> thank you very much. coming up, rise of the machines, a closer look at the consequences of automation for the american work force, and a quick check of the european markets right now. see if there's more impact from yesterday's selloff in the united states. down arrows, but just fractional moves in germany, england and france. "squawk box" will be right back. 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.

got some deal news. stanley's black and decker is buying the tools business of newell brands. this includes the industrial cutting, hand tool and power tool accessory brands, irrin and lenox. stanley blackdecker down. the worth of 47% of americans could be worse in the

coming decades thanks to digital technology. let's bring in the senior editor and columnist from the economist, his new back is "the health of humans: work, power and status in the 21st century." i'm scared, ryan. thanks for being with us. there's no way creative destruction is going to open up lots of opportunities for people? and that it's not different this time? it's always been okay. remember, we don't do any of this stuff by hand. you remember, we don't do the separating graining by hand anymore, do we? >> we don't do that so much. things did work out in the past. i think things are a bit different this time. the sort of -- the big line of defense that humans had in the 19th century was that they had this brain power that computers -- or that machines at the time didn't have. so they could learn to do new things. the tricky thing now, is that software is becoming better at learning how to do all those

thinking tasks that humans do. so the scope to take over those jobs is a lot greater. the other thing to remember is that even though things worked out eventually, the ludites had a pretty rough time of things. there's a reason they wanted to smash the machines. >> i know. in the news today, the poor coal miners, hillary will give them $30 billion to do something else. the problem is some of them don't want to there's always retraining. but what you're talking about is bigger than the industrial revolution. someone said that -- the productivity gains from the internet and from technology has been so amazingly phenomenal that some day all of this technology, we may not all have to work quite as much. we may all have a great quality of life any way from fewer people actually -- i don't know if that works. i saw that movie where -- what was it?

which one? >> pixar movie where all the fat people were -- full figured people -- >> wally. >> they don't do anything anymore. they're up existing in virtual reality, just eating a lot. they don't have to work. >> yep. >> yeah. that's the dream. one datek y technological proce will allow to us do what we need to do with machines. the tricky thing on that is we count on work to do important stuff to give people the money they need to put food on the table, to let people know how to spend their time, spend 40 hours a week. and you see -- you talk about the coal miners, when folks don't have good work available, they tend to be unhappy, unhealthy, rates of drug ad be like that, it may go up. be like a dystopia. we'll have to find new ways of

organizing society to deal with that. >> that was in the back of my mind, what i believe, too the dignity of working earned success, everything else. actually that was pretty much the way the movie characterized it. it would not be a great situation to -- that smart guy, ben franklin, others talked about how great it is to put in a good day's work and to be compensated for it, which is one of the problems in this country right now, the 40-year low on participation rate. it would be nice if everybody was able to earn their living and not be on the government dole. >> a lot of people who fine themselves stuck collecting social security or disabilities, when they prefer to be working, would like to have the opportunity to have a good job. the issue for us, as a society, technology is going to get more and more powerful. do we then say, well, we're not going to let the robots do that

work. or, you know, do we invent tasks, sort of have a new deal style works progress administration where we create work for people to do? even if it doesn't necessarily need to be done? >> that's the of politicians right now. you know. digging the holes with teaspoons. tablespoons. then sewing them back up. i don't know. that doesn't work well either. that's not an efficient use of capital. these are daunting challenges. >> but this is happening over 20 years, right? that's what you're saying. this is not an overnight thing. i mean, people have time to accept the change. it's not like tomorrow we're all going to be out of a job because some robot is going to be sitting up here. >> that's absolutely right. it's not like we're going to wake up tomorrow and all be out of work. but i think we're already starting to see the stresses that this process is placing on us. you know, automation has displaced a lot of workers in a lot of different fields. it's made some workers more

productive so they can do jobs that used to take many more people to do. then as workers have been pushed aside by the processes, they found it tougher to find work at good pay. they've been competing with each other, with hundreds of millions of new workers from emerging markets. and that kind of glut of labor has held down wages. and so we're already at low wages, low productivity already grappling with these stresses. even if we're not all being replaced by robots. >> not just replaced, ryan. maybe liquidated. maybe -- who knows -- why would they need us? why would they need one guy to -- >> are the robots going to turn on you? >> we're entertaining. we give them something to watch. >> maybe they'll laugh at us because we have emotions and things like that. those are the pgs os, love us, hate us, or be ambivalent to us. i hope they don't hate us. ryan, thank you. >> thank you. coming up, stocks to watch including a familiar face from

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let's hit some stocks to watch here. delta announcing executive shuffle. the airline's executive chairman is retiring.

blake the former ceo of home depot will take his place with the title of non-executive chairman. >> that's interesting. >> sprint is seeking to raise $3.5 billion by mortgaging off about 10% of its wireless airwaves. >> i think richard anderson isn't that old, really. he's a great executive. i wonder if he's done. you know? >> you think there's a second act for >> pretty talented guy. he's a golfer though. >> maybe that's it. his third act on the course. >> i hope that's not what i need to do when i -- that's not going to be a good second act. coming up, breaking news on housing. the latest report on mortgage apps is just minutes away. you're not even going to want to go to the bathroom with that coming out. yeah. plus we'll get you ready for friday's big earnings kickoff. citi and wells fargo set to report.

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the fed minutes. stirring the markets. a look at what to watch in today's session straight ahead. plus samsung's galaxy crisis enters a black hole. as earnings season gets under way, a focus on financials. some of the biggest banks will report this week including wells fargo. plus making the belly bump a work of art. becky caught up with sara blakely to catch up on her project. >> i feel very much like charity and philanthropy can be fun. >> that interview is straight ahead as the second hour of "squawk box" begins right now. ♪

live from the beating heart of business, this is "squawk box." >> that's amazing. that is nice. there's kaylie who i see a resemblance there. she is very cute. and dom chu is here. neither one of us is a candidate for that belly art. we've been working out. i have a trainer. >> i've been trying to and can't seem to drop the weight. >> let's just say we're not great candidates. we're not totally non-candidates. >> i could still be the water melon shot we saw. >> i think it's not for guys though. welcome back to "squawk box" here on cnbc. i'm joe kernen along with melissa lee. wilfred is here. i didn't say you because, obviously -- >> there's no bump there. >> no. nothing. it's like indented. >> it's a concave. >> you're 30.

it's easy. it's not a big deal. it's easy for you to stay like that. just wait. >> poor wilf. he just got here. layi into him. [ overlapping speakers ] >> i've got dom on my side. >> concave is not a compliment. >> are we talking about the bond market now? >> here are some of the stories making headlines at this hour. samsung slashing profits by a third. also cutting revenue target for the year. some $18 billion was swiped from the market yesterday. and shares fell further overnight. we also continue to watch deutsche bank today. the firm carrying out an internal shakeup of senior investment banking staff. also making a return to the bond market yesterday. raising another $1.5 billion. last week it raised $3 billion. highest borrowing costs among the european peers. investigators are still waiting on word from the u.s. justice

department. walmart has hiked the salaries for entry level management to nearly $48,000 a year. the announcement comes before a rule that extends mandatory overtime pay. the new rule set to take effect on december 1st will require employers to pay overtime to salaried workers which is double the current threshold. the new wage hikes will shield walmart from the additional costs. shares of barracuda networks rising. the i.t. firm reporting earnings that topped consensus. the stock did better in after-hours trading. over 10%. the company specializes in virus blocking and e-mail security. which, wow. >> in demand right now. >> i know. the company's ceo will join us at 8:40 eastern first on cnbc. amazon is launching a paid music service that will cost $80

a year for prime members. non-prime members will pay $10 a month while members of the echo device will pay for the version of the service that only works on the echo. amazon already has prime music. but that only has about 2 million songs. the e-commerce giant says they have tens of millions of tunes. a selloff in the markets for disappointing earnings results. the s&p, dow, and nasdaq all down more than 1%. dom chu is here to run down bull and bear cases for the markets. >> what we have right now is the worst market drop since september. we're talking about across the board. every sector within the s&p 500 lower in that. like you said before, we're down about 250 points at one point during the lows here. if you look at real weak points in the market, you mentioned the dollar index. emerging markets were a point of interest for us. because we saw some really bad moves. one of the big etfs that tracks it.

huge move lower there and the biggest move was samsung. you can see why those things went down the way they did. treasury yields also moving higher. highest since early june. june 3rd, i want to say. we have a number of reasons those things are an issue. even though we're hovering near record highs. one of the reasons why, if you look at some of the early warnings. another cyber security -- on october 27th. also one of the other ones we want to key on is who makes nuts and bolts, stuff that goes into buildings and construction. they say their core markets are experiencing weaker demand. if you look at the housing

sector. it has for quite some time. >> they actually make -- >> the nuts and bolts. >> they don't make the nuts and bolts of an industry -- >> they make physical nuts and boths. >> you're not using that as expression. >> no. i think that didn't get a lot of attention yesterday but should. if you look at the expectations, you had christine short on earlier talking about what the crowdsourcing says. right now thompson reuters says we could see 0.7% drop year over year. it would mark that streak of earnings declines we've seen for awhile. the only hope we have here is that analysts historically have lowballed these going into earnings season. they typically come in a little bit better. the real key is going to be whether or not the materials, health care and technology can propel things. they're the ones that are going to power that earnings move. whether or not energy -- that's the wild card here. because you have a 68%, 69% drop still in energy earnings.

if they could get like a 60% drop or a 55% drop, that could push us over the top and we might see earnings growth. there's the bull case for this. >> quickly, yesterday selloff which was significant. are you putting that down purely because of disappointing earnings 1234. >> no, no. and of course joe tanney is sitting here from a strategy standpoint you look at the interest rate concern. there's always the idea that earnings could come in worse than expected. there's always the idea that we don't exactly know what brexit is going to be in that next chapter, that next step. we see pound down at a 22 handle right now. there are a confluence of reasons why the markets are the way they are right now. i would just point out that the bullish case in this whole scenario is that over the past five or six years, arguably every single time there's been any kind of weakness in the market whatsoever, had you

bought the dip you'd be at record highs again. so i'm not a raging bull by no means, but if you look at the reasons why people still say, hey, there's room to grow in the markets, they are right -- >> except the valuation is catching up. that's different. valuations are higher. >> and it has been for awhile now. that's going to be the real reason why. whether or not you can have a market where multiples that you pay for every dollar of earnings continues to be expansionary, it's probably not as relevant. >> don't move. stay here. let's bring in joe tanney from bessemer trust. and jim paulsen from wells capital management. give me one second, joe. i haven't seen this guy in awhile. paulsen. where are you now? not physically. but with this market here, what's your latest thinking on that? i haven't spoken to you recently, jim.

>> well, i kind of turned positive again on the lows here in february. and i've kind of remained that way. to tell you the truth, i've gotten more positive. i think we've been flat here for the last couple of years. dealing with a lot of different issues. and i think we're coming to some conclusion on some of those. i hope. and i think we're going to break northward out of this going into next year. you know, we've been dealing with earnings as we were just talking about. i think we're going to maybe find out we finally are turning northward on earnings momentum. i think we're learning on global growth which i think is going to do a little better. then lastly i hope that the fed just follows through with the rate hike and we get beyond that after two years of worrying about whether the fed was going to raise rates. i think we'll get comfortable with it, move on. >> you know, you made good calls. one thing i bring up with you all the time, your inflation

call, you were way early. obviously. and i don't know if there's any -- we have guys like larry summers on here. i don't know if it's ever -- if the global economy's ever going to be strong enough to get us to stop worrying about deflation or disinflation. do you think we're finally at a turning point? because until that -- we see that, i don't know whether you can assume we're getting out of this slow growth period. >> if you look at core inflation or wages, there's been a definitive change. by any measurement is looking very different than early in this recovery. and that same core inflation if if you look across the globe inflation is up in most places.

it's up in japan. so i think there has been a bit of a tone change on inflation. and if we resurrect the commodity markets and you see oil now back over 50 and you get the headline numbers going up, then i think those core numbers are recognized. >> what do you think? is he right? >> i think if you look at u.s. inflation, absolutely. we have seen signs of inflation trending higher. of course we have lower oil prices now starting to pick up. but if i look outside of the united states, i still think you're going to have accommodative monetary policy. take a look at inflation expectations in japan. of course we haven't evenalked about the impact of this. and the impact it's going to have on inflation and economic growth in the uk. but this policy around the world i think is going to keep interest rates very low. that in itself is going to be supportive to the tour assets.

which is, you know, companies setting the bar very low with their guidance coming in and effectively exceeding those expectations. you also consider what's going to happen next quarter if you have higher comps from oil prices. this drag that we've seen on the s&p 500 over the past several quarters, it's finally going to turn into a tail wind. i think there is an argument to be made there that while the beta in the market, if you will, is sort of running out, you can see earnings drive profitability, drive markets higher over the quarters to come. >> joe, we've seen yields stick up over the last couple of weeks. close to 1.8 this morning. that's driven that? is that because one rate hike has been priced in? if the investors are already taking that on board, then there's room for upside again. >> i think it's a combination. one, it is expectations of the fed raising rates in december. i certainly -- i agree with jim. i hope they raise rates and we can finally move on from this. but there have been a few other risk off factors, if you will,

that have dominated sentiment 3 on rumors of opec and what they're going to do. of course brexit has been in there. i think all of these things have led to elevated interest rates. >> quick question to you. you like cyclicals. tech already had a great performance. are earnings going to be a new event for tech? going into a period of heightened volatility towards the end of the year? >> i think earnings will come through for technology. it's done well already. but i kind of think it might be continuing to move dow the cap spectrum in more mid and small cap tech stocks as well as other stocks are going to continue to do better. i believe that's what's led this

market mostly has been three big themes. it's been by computer and bondlike stocks. i think every one of those themes is in the process of changing, melissa. and the balance of this recovery, we're going to go where national stocks lead america. where mid and small caps beats large. and where more industrial and capital goods, productivity enhancing lead consumer and bondlike stocks. >> all right, paul. so the u.s. economy is still going to thrive even though your guy bernie isn't going to be president? i mean, you over that yet? >> the bern will never go out. >> i know. i know that's what you're thinking. so you think that we don't need that -- that was necessary but not sufficient if he got in? you all right? you're good? you're optimistic? you don't need this, do you? are you in minnesota, right?

>> yes. us and the other comrades are doing good. >> he can't help himself. anyway, thanks. joe, thanks. still to come, a number of financial firms set to report this friday. closely watched by investors. we'll break down what to expect coming up. the beauty of the belly bump. spanx founder and author of "the belly art project" sara blakely celebrates pregnancy. we catch up with her to talk business and her new book. >> for all the money, i bet no one would ever guess who's the man who painted his belly in this book. >> that's coming up on "squawk box," right here on cnbc.

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♪ that's one of our morning viewers outside keeping us entertained. good for him. i like it. >> we don't know whether he's dancing. he might be a cyborg. have you seen on hbo? you don't know who's a host and who's a visitor. you don't. and the whole pretense -- the idea of the show is that the hosts don't really know that they're hosts. they don't -- you know, and

then -- >> kind of like us. >> yeah. exactly. >> we're still playing the music. but we can talk over it. >> he's sitting right outside too. >> oh, god, he's naked. >> let's move on. the banking sector will take center stage on friday. joining us now on what more to expect from the banks, paul miller fbr head of financial institutions research. paul, good morning to you. thanks very much for joining us. i mean, before we actually tackle the actual earnings, i suppose the focus not just for wells but for all the ceos in the earnings calls from analysts is going to be is there repercussions from the whole sector for the scandal? >> we're very concerned about that. what wells has done is probably more common in the industry than we want to talk about. given the fact we have a flat

curve for many years and low rates, you know, one of the drivers was pushing the retail side and pushing them hard. so what was accepted five, six years ago is not accepted today in some of these banks. i hope it doesn't become a focus going forward. announced investigation across the whole sector. i hope they're just not on a witch hunt and a lot of banks come out better. i think welles was the most aggressive. they were trying to get to that magic eight. i think backed off a little bit. but i'm very concerned this could bleed out. it's not going to happen tomorrow. that's more of a long-term risk right now. >> as for the earnings themselves, we saw pretty strong growth. there's been some news in the last month or so that might have slowed down. is that an area they could disappoint this quarter? >> some have come out and tempered the loan growth. we're seeing a deceleration of cni growth which is one of the

most profitable loan categories inside the banks. but rezi loans are doing strong. that could offset some of that. but the quality of those type of loans are not as strong. so i think wells sees som tempered loan growth going forwargiven what we saw in the third quarter. >> paul, when you think about the fallout on the sector from what's going on at wells fargo, it's probably going on cross sailing this high pressure sales tactic probably going on more than we like to talk about. when we talk about the regulatory impact, what's the worst case scenario? one could be that retail bankers could be held to a fiduciary standard which would completely change recruiting across the industry. >> in the mortgage industry, that's what they did. i think that's probably what they're going to do here. one of the things that a lot of people inside government, they want financial products bought, not sold. and a lot of these companies sell these investment products, you know, that's how they gather

fees. you're seeing things out there where for wells fargo somebody could make this if they hit all their bogeys. now you're not going to be able to give those incentives out there. some of the growth accounts are just not going to be there. so i think this is going to be somewhat a of a headwind for the industry. my biggest concern is this is the next step of making these banks just pure utilities. and you can't really do anything beyond what the government tells them to do. you saw it with dodd/frank. they came out with underwriting standards. i'm sure there are those that want to find out how to cross sell inside every institution which means they don't want the high pressure sales guys in there. >> one big difference from q1 and q2 is that the banks have performed well during q3 in terms of share price. so which banks are still relatively attractive and can beat expectations this week and

next week? >> you know, one of the -- i don't know if anybody's going to beat expectations. i think everybody's going to come in and probably temper down earnings. we think bank of america is one that's done -- they're blocking and tackle. they've never done anying real good. very inexpensive at these levels. if they can start earning 10%, 11%, they're getting their cost of capital. you could see this trading close to $21 down the road. >> great stuff. thank you very much, paul. paul miller of fbr capital markets. >> so you're going to talk about the cubs. and my confusion was did you hear the cheering when the cubs struck out the giants? i was wondering, because i thought they scored in -- i didn't realize it wasn't at wrigley. it was at at&t park in san francisco. so in the top of the ninth is when the cubs had tied it up and gone ahead. and then the guy struck -- retired the side. that's why i was confused.

there was so much cheering going on. but they were winning on the opposing team's -- that's the way it worked. >> are you into american baseball yet? >> i haven't been yet. i've asked joe to take me and he keeps refusing. >> he says he thinks the bats are messed up because they're not flat. >> i haven't said that. have i asked you to take me to a game? >> why do they pitch? >> they bowl. >> it's not even called pitching? >> we're going to break. cubs finally on the good side of a rally eliminating the giants in a comeback. highlights coming up. >> i've been in one of those cages. d aflac pays cash. aflac! isn't major medical enough? no! who's gonna' help cover the holes in their plans?

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good morning and, back to "squawk." >> don't hurt yourself.

>> just trying to take on the advice you're giving me, joe. among the stories front and center, the fed will release its minutes from its latest meeting. in the decision to keep rates unchanged. also worth watching today, speeches by dovish new york president william dubly and george last month. the yield on the treasury this morning. let's have a look. it's 1.782%. ticking higher once again. but only fractionally. dropping 6% mortgage apps in the last week. and in corporate news, stanley black and decker is buying the tools business of new brands for nearly $2 billion in cash. stock prices right now this morning, big move in stanley black and decker down. >> looked like a guy's name. but it's the merger.

>> that was a tricky one. >> yeah. you know, "squawk box" itself was -- we didn't know 20 years ago that seemed like a really stupid name. i don't know. maybe it still does. but hard to say. >> it's easy to say. i think i say it fine. but clearly i don't. >> i hear it. he says squawk. >> fine, fine, fine. >> the pronunciation criticism is totally there. >> it was a twit -- it was someone on twitter. >> it was a twit on twitter. >> the cubs clinching a ticket to the national league championship series. this is the year. i mean, it's so long for everybody. a magical season for chicago. the cub trailed the giants 5-2 in the ninth inning. see, hear the cheering? it's in san francisco at at&t park. but they rallied for four runs in the sttop of the ninth. they came out and just shut down the giants in the bottom of the ninth.

>> i think since you asked him specifically and said no, that's rude. >> you've got to pick a team. >> you should pick yankees. >> most people like the mets. i've been to a yankees game and i ended up sort of liking them but my entire life i've not liked them at all. >> you can indoctrinate him. >> when you come to london i'll take you to lords and we'll watch a test match. you need to have five days for it though. >> i thought you were going to take me to an arsenal game. >> we'll do that. >> arsenal. i think you're calling me something nasty. >> well, that is in the first four letters of the world. >> flaming arsenal. anyway, election day keeping markets on edge. it's not just the white house causing concern among investors. there may be some down ballot

distress. i agree with this, eamon. the latest, i talked about it earlier. the latest survey said a shrinking number of americans like divided government. yebl that. i think one side controlling the executive and legislature, that would scare the heck out of a lot of americans. i think that's part of the problem right now. >> yeah, look, i never thought voters go into the booth with an idea of what structure they want. they vote for the one they like and leave it at that. but where the chips fall is where they fall in terms of divided government. this year with all this sort of near open warfare among republicans particularly between donald trump and paul ryan, the republican speaker of the house, there's been a lot of speculation about whether the house now is in place.

remember 435 seats in the house of representatives. you need 218 for a majority. only 17 seats are currently rated as tossups by the cook report. so here's the math. you start on the left-hand side of that bar graph and work your way to the right. solid democratic seats are about 177. cook says likely democratic seats are five. leaning democratic seats are eight. if the democrats pick up all those, don't lose any of their expected not to lose, that's fine. they're still not there. then there are the 17 tossup seats if the democrats sweep all of those tossup seats which is a tough thing to do, they are still not at 218. they need to pick up some of those lean republican and likely republican districts in order to take the majority. that is a very, very tough climb. so even if they get all those

tossup seats and there are only just 17 of them in the middle here being fought over difficultly on both sides. even if they do that, they still don't get the majority. so the math here is tough for democrats even though they might like this political infighting they're seeing. >> i see what you're saying right at the top. but i think in the two midterms we've seen in e the last number of years, there was more than just -- all politics weren't just local. you saw what happened. it almost looked like, wow, we're going to put a -- maybe it was a response to the way obamacare was passed or whatever caused it. i mean, there was definitely a reaction to overreach by the executive branch. >> and you can see sweep years. and if the bottom falls out of the republican party and this is starting to feel with everything that's going on like a bottom falling out type of year, if that happens, you can definitely

see the democrats taking it. but the math is they have a real uphill climb to do that. if you're a republican right now, you feel you've got a pretty good fire wall against that happening. that's why you're seeing paul ryan say he's going to raise money and do everything he can to protect that majority. it's a big majority right now. >> even people we have on the show look at things through the political prism. people say the market's going to collapse a thousand points if trump were ever to win. you put in hillary clinton and both houses of congress, and that becomes a reality on what she's proposing in the tax and other areas. i would say look out below with that. >> that's possible. but more likely at this point if you just look at the numbers, more likely now is hillary clinton may be a democratic senate. but a republican house. and in that scenario, you wonder what hillary clinton could do with the presidency even she

wins it given almost nothing will come out of a republican house that she signs. and vice versa. maybe some infrastructure spending. >> but then you got scotus not reversing any of her executive action. scotus was the only -- supreme court was the only -- what's the word i'm looking for? the only breaker on a lot of obama's overreach. so, you know, without that, then look out for that too. >> and you'd have a hillary clinton sort of executive order presidency much like we've seen the latter part of the obama presidency. she'd be looking to do things through the executive branch, not legislatively because paul ryan would be sitting up there saying no. >> i don't mean to -- sometimes you say things that just -- i couldn't -- let's just go to break. sometimes i don't even try to do things. you just -- anyway. thanks, eamon. >> you bet. >> yeah. that was nothing. spanx founder sara blakely is making the belly bump

beautiful for a good cause. becky spoke to her before her maternity leave about "the belly art project." check out the futures at this hour. now positive because wilfred's here, i think. maybe it's the yum brand stuff.

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spanx is a billion-dollar brand founded by entrepreneur sara blakely who remains the sole owner and runs the company day-to-day now. blakely is turning her attention to another female silhouette known as the baby bump. and before becky quick started her maternity leave, she sat down with blakely to discuss the belly business. >> welcome, everybody. we are joined today bizarre ra blakely. and she is known for being the founder of spanx. she has taken her creative arts in a whole new direction right now. and is out with a new project called "the belly art project". >> i'm so excited that you participated too. >> yes. perfect timing for all of this. it's got over a hundred moms who are showing off their bellies and they're doing this to raise money for mothers in need. >> naturally the idea came to me at 3:00 in the morning three days before i was delivering my

first child. i woke up in the middle of the night and thought my body is amazing. the state that it's in. and i thought it may never be in this state again. and i wrote down at 3:00 in the morning, water melon, beach ball, basketball, and mr. potato head. >> because that's what you felt like. >> then i fell back asleep. then friends painted my belly. i went into a grocery store, bellied up to a watermelon zploi zplai. and it was so much fun. i was giving them as a gift to my husband. the pictures turned out so fun and amazing i thought i want to do something more with this concept and idea. >> you linked up with christie turlington burns. how did this come about? >> when i decided to use women's bellies as canvases of hope, i feel very much like charity and philanthropy can be fun. and christie turlington's

foundation came across my path and i went to haiti with her and my team. this was so linked with pregnancy and maternal health that i wanted to give all the proceeds to some foundation that was directly linked to helping maternal health. >> we can reveal today for the first time that with all the women that are in there, there's also one man. >> one man. and for all the money i bet no one would ever guess who's the man who painted his belly in this book. >> do tell. >> drum roll. warren buffett. warren buffett is in the book. he has such a great sense of humor as you know. he's so much fun. i showed him what i was up to one day at lunch. i was at a lunch and got seated next to him which was awesome. and he said what are you up to and i showed him on my phone all these bellies painted. and he burst out laughing and said that's amazing, i want to be in the book. i was like, what?

warren, you're not pregnant. he said that's okay. then he grabs his belly and said don't you have enough to work with? >> you are still running a business. you founded spanx. you came up with this idea yourself. it's a billion-dollar-plus brand. is this going to be a founder-led company or do you see it being sold down the line? >> you know, i don't know. i don't know. i operate very much from gut and intuition. when i first invented spanx, i never worked in business. i was at a party and three men came up to me and said we heard you invented something and they asked me what my exit strategy was. i didn't even know what they were talking about. and i remembered saying to them, my exit strategy is i want to leave the room and look good while i'm doing it. that's my exit strategy. >> the other new thing you're doing this fall is advertising. and i can't believe the brand has gotten this big without you advertising. >> there's all these new things

happening. >> how'd you get to billion-dollars-plus without advertising and why advertise now? >> i'm tired. i didn'tay no to anybody for over a decade. i mean, for 15 years i was, like, all over the world giving speeches and anybody who would interview me and radio and just really trying to explain what the product was myself. and it really became a word of mouth brand. >> well, thank you for sharing the belly art project with us. >> thank you for being in it. >> yes. you actually convinced me to take off my top, too, for this. so you are a very persuasive person. >> thank you. well, you have the cutest belly ever. the lucky penny. are you kidding me? >> we can't thank you enough and wish you the best of luck with the "belly art project." we should point out that it is out. you can check it out right now. >> all right. thank you, becky and sara. and any commentary i'm going to leave to you on this, wilf. >> just a huge congratulations

to becky and matt. >> now baby. >> and little kaylie is sweet. >> penny was cool. >> genius. and warren buffett. you wanted to potentially -- you expressed some interest although your belly is way too small to be painted. >> there was a time when it wasn't exactly like that. but there was a time i could have gotten one of those beach balls or something like that. >> no. >> hard to believe. i know. >> i cannot. >> i know who can't believe it is mr. "gq." . sorkin's just as bad. you're fine. still to come, a list of stocks you need toatch at the open this morning. plus we ride the rails and find out what you can expect from csx. the first of the major rail companies to report today. "squawk box" will be right back.

let's take a look at stocks to watch this morning. delta announcing an executive shuffle. the airline's executive chairman is retiring. frank blank will take his place with the title of non-executive chairman. and check out shares of fortinet plunging. revenue and eps coming in well below the street's targets. down 14% here.

and csx expected to roll out quarterly results today. here with more is morgan brennan. hi, morgan. >> good morning. i think bumpry ride is the key phrase here. for csx, wall street expecting a 13% drop in profits. that's on lower revenue of $2.7 billion. and overall more earnings weakness are expected for the freight carriers nap is likely to prevail through the season. the focus will be on volumes. so chris weatherby believes -- in the mix of what they carried improved. he likes union pacific coming into results. truckings had results as well. we're coming into the business season for trucking. but over capacities weighed on rates. that's something to watch when werner enterprise swift transportation report in coming weeks. avondale partners is really down

beat on those. will be winners with volumes, yields and and margins. other topics for transportation. we've got the bankruptcy which is continuing to rule -- which in addition could be a tail wind for some of the logistics. also some early commentary, guys, on the impact of hurricane matthew. we saw a lot of trucks that were deployed. in terms of what is being shipped these days. are we seeing less of that? more on the energy front for instance. >> starting to see the energy comes back. one of the interesting areas there. inventory levels for coal. that's starting to be a lult more positive where the rails are concerned. we've seen weakness in construction materials like lumber this year.

another area that's actually been a bright spot has been beer especially cross border from mexico. we're seeing that. >> samsung can actually make a difference, the recall, to the shipping in you remembers? >> it could potentially. we've seen it come up in certain earnings calls. it was a focus coming in a couple of weaks ago. the fact that basically you'll have more of the shipments move around and quickly. >> great stuff. thank you very much. meanwhile shares of barracuda networks rising. the i.t. firm reporting revenues that topped consensus. the stock rising in after-hours trading. the company which specializes in e-mail seeing shares jump some 9%. the company's ceo will join us as 8:40 eastern first on cnbc. >> which a taking the sector down in premarket. and amazon is launching a paid music service that will cost $8 a month. or $80 for the year for prime members. non-prime members will pay $10 a

month. while owners of amazon's echo device will pay just $4 for a version of the service that only works on that device. amazon already has prime music, but that only has about 2 million songs. the e-commerce giant says the new service has tens of millions of tunes. and the creepy clown craze in america is taking a toll on a familiar mascot. yep. ronald mcdonald, he was always kind of creepy but you don't mistake him for one of the other type of creepy clowns. you know it's ronald who works with kids and, you know, and does a lot of good. >> gives you burgers. >> exactly. mcdonald'ss limiting public appearances of its spokes clown ronald mcdonald. the move comes after a series of sinister clown sightings across america which are very strange just to try to understand. but also -- >> across the uk as well. >> really?

>> yeah. >> it's like a global phenomenon. >> and then you've got the hard working clowns, circus clowns or whatever that can't even step outside at this point. >> they've got to change their costume. >> in one of the bbc writeups for this, there is a union for clowns in the uk upset about this. saying the few creepy clowns are ruining it for the industry of clowns. which i did find amusing. >> you can imagine if that's how you -- then there's krusty the clown that's not a good person. >> but we're approaching halloween. >> 300% increase in clown costumes for halloween. >> everybody. >> right. which is scary. because you don't know which one might be one of the evil clowns. and there may be an evil clown. >> of course. >> anyway. >> yeah. >> there we go. #creepy clown. still to come here on "squawk box," yum brands spinning off the china division and planning to put thousands of restaurants in the hands of franchisees as it looks for ways

to save cash. the ceo greg creed joins us to talk strategy coming up. but first check out the futures. slightly higher after all s&p sectors fell yesterday. over 1% decline for 8 of those 11. we are higher by just a little amount this morning. oil down about 1% yesterday. but given the recent gains, not too much of a decline. wti at $51. quite a decent tick up over the last few weeks. up near 1.8 now. that's another factor which weighed on markets yesterday. the tick up in yields and the strong dollar alongside that. we're back in just a couple of minutes. 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.

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the fast food giant is getting leaner. a cnbc exclusive with ceo ahead. plus earnings central. barracuda networks topping expectations and the stock is on the move. the ceo will join us as the final hour of "squawk box" begins right now. ♪

live from the most powerful city in the world, new york, this is "squawk box." >> welcome back to "squawk box" on cnbc. right around the flat line. up three on the dow. not even worth mentioning. up less than one on the s&p. up two on the nasdaq. take a look at european equities after yesterday you wouldn't expect them to immediately bounce back. here for some well founded reasons that probably are noble type reasons. although the pound might be good for -- >> it's bounced up today.

not a vote but a debate. anyway, among today's top stories, the fed will release minutes from its last meeting. three of ten dissented in keeping rates unchanged last month. also speeches by william dudley and esther george who was a dissenter last month. mortgage applications dropping 6% in the latest week. the average 30-year fixed rate rose during that period. and in global much, theresa may telling parliament she would be ambitious in brexit negotiations and strive for the maximum possible access to the european market. that and the debate that has been taking place helping sterling rally some 1.1% today. 1.2254% perhaps finding a bit of a bottom in the new hard brexit range that has been testing in recent weeks.

all right. opec releasing its monthly report this week. it suggests the oil market would see an average surplus of 800,000 barrels per day next year. also up about 13% in less than two weeks since opec first proposed in eight years. it was met with a lot of skepticism on whether it would have any effect. i think at this point we'd have to say, you know, who knows if it's lasting. but, you know, just writing off opec as a swing producer with no juice anymore, that was not correct. >> got russia involved as well. we haven't seen the cuts. we'll see i think the rhetoric has been -- i think 48 hours

ago. they played down how much they believe this is going to hold. >> i think that's the feeling in the markets. crude inventory due out today. that could be a mover in today's session. stocks to watch today. black & decker to buy newel. 10% of its business portfolio following the acquisition of jarden this year. you see newell rubbermaid up 10% there. samsung slashing profit outlook. shares continued to fall overnight there. just fractionally. that was a weight on the eem. and take a look at eriksson. sales also down sharply. this coming just a week after the equipment firm announced plans to slash 20% of its domestic workforce. >> it's crazy. it's a developed market company.

i mean, it just exports smartphones around this developed world. had a big effect yesterday. >> did indeed. yum brands is our next topic here. you can't smell it at home, i guess. >> man, it's good. it's been killing me. >> maybe some day. smell-o-vision. >> that would be bad. >> not all smells should be transmitted. >> but you know what? >> this one should be. >> my entire life kfc in a bucket is a smell that no one can really resist. and then you know, we got some taco bell and pizza here. investor meeting the fast food giant is planning to put more of its restaurants in the hands of franchisees in a bid to boost savings and sales as it plans to spin off its china business. joining us is greg creed, ceo of yum brands. >> thanks for having me.

>> we can talk cricket. >> right. and when novak used to be on i used to say the way i talk about taco bell, there's never ban paid endorser. but i have said nice things overall. i can't really pick which one i like best. >> you said taco bell earlier. >> having three children, you can't pick between your three children. you love them all. >> yeah. but you don't want them to travel as much and they don't want to go to china in im. >> it's not your typical spinoff. you normally spin off the business and no longer have a relationship. we'll get a 3% license fee from china. no one's going to cheer on china like we are. what's ironic is we've never been closer. i think the collaboration between the two companies has never been better. you'll see a lot of our ideas going to china. >> was a factor in the food scares in the country were becoming too much to hand snl. >> no we thought we could create independent growth companies. we thought we have an equity

play but with higher risk. we also have lower growth business if we obviously separate the china business out. so that was the strategic business for a reason. >> how much does taco bell translate to china? >> we're going to open our first later this year. the thing about taco bell is you buy a product form. you don't say i feel like beef, i'm going to have a taco. so what's inside the product form we can customize. >> so like what? i'm curious. you walk into a kfc in china, what's on the menu is still different here. >> yeah. what's inside them will have more chinese tastes. but i want a taco or a couple of tacos. now, 80% of the menu remains the same around china and the rest of the world. about 20% we localize. i mean, food is a localized thing.

>> i think it -- you know, my analogy was i'm sure there's great chinese restaurants in mexico. i don't know why there can't be great mexican food in china. >> the hamburger guys are successful. i think -- >> why wouldn't taco bell be a success in china? >> i think it's going to be a -- i've wanted taco bell -- i ran taco bell for eight years. i always thought it was going to be a huge success. if you think about what makes it great. it's current, cool, has a cause. it's a tech savvy digital brand. and it's a millennial brand. that just screams china. >> you didn't say anything about how great a hard shell taco is like with the extra hot sauce on it. i mean, what were all those things you said? you sounded just like a ceo. you didn't say anything about how it tastes. >> food is no longer fuel. it's an experience. >> oh, for these millennials it's experience? great. >> in terms of the announcement

yesterday, you're cutting capex over the next years. >> it's not so much we're suffering. so we today earn about 23% of the restaurants. so we're less than a thousand restaurants. so we're not going to be many the bricks and mortar business. we're going to be in really the asset business. >> that seems like the trend these days. when an activist goes into a restaurant, they say you need to be asset light these days. what was the argument in the first place for you earning the stores. and is that going to end up being the reverse trend down the line? >> i don't think so. what i love about putting the assets in the hands of our franchisees, you put them in the hands of the local community. i always believed you are better having the customer experience delivered by someone who lives in the local community. >> you don't lose control of the restaurant? experience control? >> we keep control through standards, through orders.

i mean, all the things you expect us to do through the supply chain. people can't just go out and buy what they want and do what they want. i think there's a lot of control. i'm confident we've got some world class franchisees. >> and as we discussed earlier. did china split the stake sale there. what about other countries? >> well, we're growing a business in africa. right now we've got 70 in sub-saharan africa. russia has been a huge force. we've grown system sales at least 40% for the last years in russia. we've seen enormous growth. we just opened our first taco bell in brazil. so, you know, this is a global business. we're in 135 countries. we've got three brands. and i think the key for me is we're going to be more focused around really the brand building job. and we are going to be more efficient which we talked about yesterday as well. >> sorry, you go.

>> are you being helped by chipotle's woes? >> not necessarily. taco bell is doing well. we had a great quarter, third quarter. we obviously have had five years of good same store sales growth. but i think they're very different brands and, you know, we don't sort of benefit from their woes. >> u.s. consumer more broadly? >> i think a wait and see right now. just waiting to see what happens with the election. i think the good news is we had a great third quarter. kfc u.s. was up six. twyear comps were eight and seven. despite the market, if you've got distinctive and relevant brands, you can win in any marketplace. >> how do you re-energize pizza hut though? or is it fine the way it is? >> we got a lot to do. of the three brands, it's the one we've got most to do. we've got to make it more distinctive. >> maybe right about the -- >> we have the best pizzas.

we just made it too hard for the customers to get them. we've got to make the process easier. people want easier and better. >> you take a look at dominos, do you say that's what we should do? you can order online. you can send an emoji and get your pizza. >> they've done a much better job of technology. we have to catch up. we have a lot of work to do. but we are still a global leader in pizza. we have 16,000 restaurants. we've got $12 billion in sales. and i think the proof is we turned around our kfc u.s. business. two years ago everybody had written off. we can do the same with pizza hut. >> what do you think of apps like uber eats? are they an expanded thing for restaurants like yours? >> we're partnering with these guys. i mean, look. if you want to make food easier, the old easy was a drive-thru. the new easy is to have it delivered. we've got these amazing brands people want.

they've got an easy way to access it. >> they closed the taco bell where i used to go all the time out in new jersey. and i don't -- you know, people think everybody's going to switch to chipotle and baa a fresh. that doesn't do it for me. maybe i'm -- i want a shard shell taco bell taco. you're not going to change and become more foo foo and fresh, right? >> no way. >> a bunch of beans in the burrit burritos. i need taco bell. >> you've never had a taco bell? seriously? >> i had it once. >> it's the best thing. and then the hot sauce extra hot. >> he says you can buy the whole menu for $5. >> you can. we're going to do almost $10 billion in sales. half the population eat taco bell once a month. and the average person comes every 11 days. >> they closed the one in springfield. >> i'm sorry. >> i'm like homer simpson.

>> breakfast has been a win for us. we had 40% transaction growth in breakfast in the last quarter. so we've got a business now that's almost $100,000. >> mentioning brisbane, you want to talk about cricket, don't you? >> we could but they're going to say what the hell is cricket, right? >> we were talking about the cubs, he goes there's no flat bats. i i said no there's not flat bats. and they don't bowl. >> and they need to wear gloves to watch the ball. >> novak is doing well, our friend. >> he's doing much better. got a few -- >> excellent. give him our best. he was on not too long ago. >> i will pass on your regards. we're excited and happy. >> good ly yum. >> he built an amazing business, amazing culture. to be handed that was such an opportunity. yesterday the transforms which was how do we take the legacy that he left us and how do we truly just become a groelt engine. we were really excited. >> great having you on. whenever you -- please -- i

don't want to beg, but please come back. >> and bring hard shell tacos. >> i'll bring you a hard shell taco. >> just a regular hard shell taco. that's it. seriously. and extra hot sauce. fire. it's called fire. >> have you tried the diablo? >> it's closed. >> no the sauce. >> it's closed in springfield. i should have organized some demonstration. >> you and a sign. >> i'll get you a diablo sauce and 12 pack of crunchy tacos. >> he's not going to let you get past this one. >> that's okay. the funny thing is we've opened 300 a year and we just haven't opened them in springfield, new jersey. i'll have to do that now. >> thank you, greg. >> thank you. coming up, a battle brewing in the gop. donald trump slams paul ryan saying he doesn't want his support. the latest from the campaign trail when "squawk box" comes right back. guess what guys, i switched to sprint.

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child-proof packaging... and bans edibles that appeal to children. smart provisions to safeguard our families. learn more about the safeguards at yeson64.org. welcome back to "squawk box." let's check in on commodities this morning. gold prices at this hour are down about a third of 1%. yesterday gold fell a similar

amount. of course, the dollar stronger yesterday was a factor in that. platinum falling to six-month lows this morning. falling some 0.4%. and u.s. treasury yields of course yesterday a big move. and today on the 10-year hit. it's holding there right now 1.801% on the 10-year treasury yield. this is the highest in about four months. stocks to watch this morning, shares of barracuda networks topped consensus estimates. the company's ceo will join us at 8:40 a.m. eastern time first on cnbc. then fortinet shares announcing preliminary results for q3. revenues and earnings coming in below street's targets. let's get back to politics now and eamon javers. he's following the latest from the campaign trail. hello again, eamon.

>> good morning, joe. a wild 24 hours in american politics here as donald trump has pronounced himself unshackled. the presidential candidate took to twitter yesterday and released a barrage of tweets. let me give you just a couple of them. you get a sense of the tone this campaign is taking as we go into the final days. first donald trump saying it is so nice that the shackles have been taken off me and i can now fight for america the way i want to. he also went after speaker of the house paul ryan in a separate tweet calling ryan our very weak and ineffective leader paul ryan had a bad conference call where his members went wild at his disloyalty. and another tweet aimed at john mccain. trump very critical of john mccain calling him the very foul mouthed senator john mccain begged me for my support during his primary. i gave, he won. then dropped me over locker room remarks. that's obviously trump's reference to the gross remarks that he made that were captured on tape and revealed last

friday. that has royaled this presidential campaign candidates up and down the republican side trying to figure out what they're going to do about this. democrats gleeful about all this and trying to fake max advantage. you've got to wonder if donald trump says he's going to be unshackled, you wonder whether he was shackled all the way along. this didn't seem like a shackled candidate at any point in this presidential campaign. so what are we in for here? what is the republican party in for here over the coming weeks? i can tell you republican leadership is worried about him hitting the campaign trail and going of all of o'republican candidates and there are a lot of them distancing themselves from donald trump and getting this internal warfare dynamic for the coming weeks ahead of november 8th. that's the problem that republicans see. they're trying to manage today. but it's a difficult one. >> i don't know if i'd call bill o'reilly great minds, but great minds apparently think alike.

because he had donald trump on last night. and asked him that question repeatedly. trump never really understood it. it's like, what will the shackles off look like if this is how you've been with the shackles on? he kept asking that over and over again. >> i think that was the point. >> where do you go from here? >> it was kind of funny because donald trump looked like he -- i think he understood what he was saying. but he doesn't -- i think he really does think he could let it all hang loose even more than he has already. you know. so -- >> it's interesting. he's sort of picking and choosing who he goes after in the republican party. that's what has them terrified, right? because he's got an enormous base of support within the republican primary voter contingent. but yesterday he said that he thought that marco rubio, for example, had been saying nice things about him and he hopes rubio wins his senate campaign in florida. so he's sort of endorse bing,

not endorsing, attacking, not attacking. but that's not where you want to be going into election day. upts to be reaching out to independents, building bridges. >> i know. i understand in a perfect world you would think it would be self-defeating. and i've never really been able to identify like a populist streak in me. but there are certain things about the establishment republicans whether it was from four years ago or whatever you want to point to, whatever lack of success in terms of furthering the agenda that some people think would help this country, they have not been particularly effective. and so i can see how there is at least some empathy among -- i'm not talking about myself. trying to talk about other people. but there might be some empathy to what donald trump was saying. >> donald trump has been chosen a different strategy than republicans have chosen in the past. we'll see on election day whether he does better or worse than mitt romney did back in

2012. recalled mitt romney a choker and a lor. we'll see whether donald trump chokes and loses or whether he comes up with a big unexpected victory. the pollsters will tell you that nobody has come from behind in a deficit that donald trump has now with this little time remaining. but it's a weird year. i've given up predicting. i've done this for 20-plus years. i've given up trying to figure out what the heck is going on in american politics. it's totally unpredictable this year. it's going to be a wild ride to the finish. >> yeah. that whole primary season, the establishment republicans -- who'd i call a dinosaur yesterday? somebody else. there's a lot of frustration among the parties. >> did you see in the wikileaks e-mail, hillary clinton one of her aides saying she was really afraid of jeb bush. that was the guy she was obsessed with going in the primary. that turned out not to be a problem for her. >> yeah. that's for sure. all right. eamon, thank you. >> you bet.

still to come, driverless cars hitting the road for the first time in the u can rks. we'll show you the video next. plus tim tebow saves the day. the former quarterback turned mets minor league helps a fan and the video has gone viral. we'll have that for you too. "squawk box" right back. miles per hour. traveli0 to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t.

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coming up, a check on tech. samsung pulling the plug on its galaxy note 7. can the company put out the fire, so tospeak? we'll discuss next. as we head to break, futures in the red again. what's the value of capital? what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley

♪ welcome back to "squawk box." making headlines this morning, jetblue says september traffic was up 10.8%. preliminary revenue per seat while decreased approximately 2% year on year. toyota and suzuki motor looking to explore a businesship. they will look to work together in areas including safety and technology. among the market stories to watch today, check out treasury yields here. the 10-year rising above 1.8% for the first time. we've given that up a little bit. check this out. it was the bridge that wouldn't budge. after hours of an attempt to get an arkansas bridge to fall, it

has finally been demolished. kept trying that. the broadway bridge was supposed to come down yesterday. but after explosive charges went off, the steel arches remained standing. five hours later, crews were able to bring it down using cables and a barge. stay transportation officials say they don't know why the explosion didn't trigger a plan controlled collapse. the new $98.4 million broadway bridge is scheduled to be completed early next year. >> that's a cool video. i like that. >> yeah. you'd figure the guys that put it up would know -- cool engineers. yeah, i flunked that. but they know where the stress points are and everything else. but wow, there it goes. meanwhile, a driverless car hitting the road for the first time in the united kingdom. it navigated its way around britain at 5 miles per hour. the car is equipped with a radar camera technology.

the uk government is encouraging car makers to develop and test autonomous driving technology aiming to serve a worldwide market. it says will be worth more than a trillion dollars by 2025. seems like that's the first test and we're behind the u.s. market on that. >> i mean, singapore already has a driverless car out. >> right. that's the first one ever tested in the uk as many 5 miles an hour? chop chop, guys. >> a little behind on that. ? sports news, tim tebow after his game was signing autographs when he saw a fan fall to the ground. the former nfl quarterback stopped what he was doing and immediately went to the fan who was having a seizure. witnesses say when the man became conscious, tim sat with him and talked with him and prayed with him while waiting for medical personnel to arrive. it's been a rough few days

for some of the names in tech. yahoo grappling with the fallout from the massive data breach and the acquisition by verizon. and twitter in limbo over whether it will be bought out. joining us to make sense of all this is ed lee. good morning to you. >> good morning. >> thanks for joining us. let's kick off with samsung. gauge for us how bad this recall is relative to other similar types. >> it's the worst tech recall i've ever seen. probably in recent memory. i don't think there's anything at this scale. it's not there's simply smog wrong and faulty and we'll send you a new one. it's the whole thing is scrapped. that's the problem. >> and it seems in terms of the total earnings of samsung, the note makes up about 8%. share price falls have been sharp. is that because of the brand image impossible to recover? >> i think the brand image is tough but also reliability. if they're relying on this to boost sales and now they're

estimating lower profits, not a good outlook. at the same time it's a massive company. they have lots of resources. they have great human capital. they're going to bounce back. so far i think they've done a good job of reacting relatively quickly. we don't know exactly what happened. there should be more transparency on what caused this. a design issue? >> that's the problem. they've got batteries, right, that they buy supposedly from sdi which they own a stake in. they've also got for the replacement samsung phones batteries from a chinese company. and they cannot figure out because some of the batteries were a little too big and that may cause a little of the overheating. but a company of engineers should be able to figure out what went wrong with these phones in theory. so then doesn't that throw doubt across product lines? >> you'd be surprised that in technology in general, the level of comb plexty. even engineers, even software programmers. they don't know when you program

code, for example, you think you're doing everything right. after it's all done, there's a million bugs in there. even as you design something, you don't know what the faults are. >> that happens all the time. saying this is perfect. then i go back and i -- >> and samsung in particular, their market strategy has been we want to get our thing out ahead of apple. it's been successful for them in the past in terms of rushing out the next model before apple gets out its next model. this time it's bit them. >> how much of an added issue is it that they rely on android, somebody else's software. it's not like an ecosystem like apple. if people try a new phone, are they lost forever? >> i think the potential beneficiary of this is google. because they have a new phone out, the google mpixel which using the android. if you used to be a samsung user and there's an alternative out there that could be better or just as good, it.

>> i mean, you take a look at apple shares. yesterday it was a year to date high in apple for at least the second day in a row. we've got brian white at drexel saying this is going to be incremental. he said something like 8 million new units. >> i don't think apple is going to be quite as much of a beneficiary as people expect. what's interesting is in the market place, you know, you have samsung people and apple people. samsung has loyalty too. it's not as simple as one phone versus the price or design. it's i like samsung phones or i like android phones. so people are still loyal to that idea. they'll downgrade to a different samsung phone. >> let's hit twitter. is takeover talk now dead? >> it's certainly cooled down. i think the only sort of major player in this is salesforce. it comes down to price for

salesforce. benneoff can sell it without the price coming down. >> it's happening now. >> the thing is even then even with the price coming down, fundamentally the business rationras rationale is not there. it doesn't make sense for them to have twitter. >> behind closed doors, a big shareholder like e fidelity, they're balking at not the price tag necessarily. but it's the question synergies. they don't see any -- that it's dead. it's dead on the table. >> and that's the thing. i think he'd have to really -- it'd have to come really down in price for -- you know, you want to own this thing? fine. go ahead and make something good out of it. but not at that price. we don't see it going in any value to the company. >> the price is a drop in the bucket to google. so why are we now convinced thest not the case? >> i think google actually made the most sense sort of

philosophically, from a technology perspective. the thing is google doesn't really need twitter. so they'd rather this thing not exist anyway. they don't want this to exist in the ecosystem of social media technology companies. what's interesting about twitter unlike facebook and other social media companies, it's the structure of it is completely public. right? so you don't have to be twitter to see all the crazy tweets out there. people can sort of write whatever they want and everyone sees it. unlike facebook where you're only seeing friends and family and not even all the posts from friends and family. it's more exposed, more open. it's more like a broadcast medium. but that's also the tipoff. >> google didn't become google by, well, what's $20 billion maybe it works, maybe it doesn't. then you write down $19 billion. it's not that much for google. but brand damage if you -- you don't like screwing up on -- and i don't know it would be a skrup screwup. i like it as a news feed.

but so many things i don't like about it that i wish would go away half the time. >> it's the wild west. >> it's a cesspool. i love my fans. because the ones that i still have -- >> your fans just pick me up on my pronunciation of words. >> the fans i don't -- the ones that don't like me are blocked. >> at&t and yahoo. does that deal potentially break down now? >> well, so i don't think it breaks down. i think they want yahoo. they need the ad tech. it's not the consumer facing side that's important to them. it's the technology that allows people to track and sell advertising on mobile phones on a mobile system. that's really the get here. i think, yeah, yahoo hasn't been a well managed company for years. you're seeing the fallout from all of that. >> thank you very much for joining us. >> i have paired back my twitter involvement. >> when you tweet, i see people that will tweet oh retail sales

came out. >> i don't do that. >> that i would do. >> but that's commodity information. that's not value ad for twitter. >> say something about something. >> interesting nuggets that i'll find deep in research report that not everybody's going to read, i'll tweet that out. >> even if you retweet something. >> i wish they'd all merge. we've got instagram, snapchat, twitter. it's like exhausting. >> how much do you tweet? >> it depends. i get in a rage about stuff. sorry i get passionate about a topic happening and release that information like tereheresa may speech is live. >> you don't say she's "x," "y," and "z." >> and you don't want to -- >> engage. it's like the subway. don't make eye contact. >> you don't want a twi. tweeting while intoxicated on a weekend or something. >> snapchat then deletes. >> that's what you think. coming up, shares of

barracuda networks surging this morning after an earnings bid. i wonder how long it would take us to play heart. we will be joined by the ceo to break it down after this. this man creates software, to protect this customer, who lives here and flies to hong kong, to visit this company that makes smart phones, used by this vice president, this little kid, oops, and this obstetrician, who works across the street from this man, who creates software. they all have insurance crafted personally for them. not just coverage, craftsmanship. not just insured. chubb insured.

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welcome back to "squawk box." very good morning to you. the futures right now, they are now a little bit lower. we've been hovering around the flat level, though, pretty much all morning. we were green a moment ago.

we're now down. but only 12 points to the dow. yesterday down sharply. all 11 s&p sectors down significantly. the nasdaq was down 1.5%. 8 out of 11 s&p sectors down more than 1%. the dollar strong. particularly against the likes of the pound and the euro. we're still seeing a bit of dollar strength out there today against the euro and against the yen. but the pound has rebounded somewhat. but not much relative to its recent falls. up 0.8%. european futures, we're seeing the ftse 100 selloff in light of a stronger pound. not too significant these moves given the selloff we saw yesterday afternoon. all right. that barracuda networks posting result shares of the i.t. security company on the move after earnings topped expectations. joining us now b.j. jenkins, ceo of barracuda networks. this was a solid quarter.

we try to talk about current events at the same time. and it's just hard to miss the connection with what we're seeing in the general news. isn't it? i'm afraid to say -- not only am i afraid to tweet thinking, i'm afraid to send e-mails either. i try to put it in code. >> yeah. well, joe, it was a good quarter for us. and in large part on the top line we had strength in our e-mail security offerings delivered through the cloud. and our network and application security solutions that come through the cloud too. and, you know, it was interesting hearing you talk about snapchat and twitter and facebook. there's a lot of ways to communicate, but for our customers which are, you know, primarily in the market, e-mail is the primary form of communication and it's one of the biggest threat factors out there. something we help protect them from. >> good. because the "e" doesn't stand

for evidence, right? is it electronic mail? what did it mean? it means evidence mail now. >> it was electronic back when it was coined, i'm sure. but that was a long time ago. >> not anymore. >> yeah. >> so the cloud business is inscrutable to most businesses but it's important how barracuda does what it does. correct? >> yeah. this has been, you know, an over-three-year journey for us to take our products from physical on in the data center appliances and move with our customers to the cloud. they're moving their applications. they're running their businesses out of public clouds like amazon and microsoft or using offerings like salesforce and office 365 over the past three years we've taken our products and really made them cloud native, cloud ready, and cloud managed.

they're integrated with those platforms and help customers protect their business now much better than before. >> sas being software as a service. this morning the analyst community applauded your earnings report. they also note as -- from the cloud, office 365, aws, it's not terribles. it's not significantly materials to earning right now. when do you expect to see that turn? what's your forecast? you know, maybe a couple years down the line for percentage of revenues from cloud. >> it's a fast growing part of our business. one thing we announced our cloud e-mail security package for office 365 just six months ago. and in the last six months, we already have over a thousand customers. 300 of those were net new to barracuda. so it is having an impact already on our top line. and we think that's going to

accelerate going forward. we have a really strong offering. as you may have heard, one of the biggest threats for our customers in the mid-market is ransom ware. where someone infiltrates their e-mail and, you know, locks their files down and holds it for ransom. one of the things we do really well is we've integrated not only security to protect that from happening, but also backup. so you don't have to pay that ransom. you can use a clean backup copy to restore your business. and move forward. and this is part of the office 365 package we offer. it's attracting a lot of new customers to our business -- >> did you give me a target, b.j.? back to the original question, did you give me a target of revenues? >> yeah, melissa, i think it's impacting already and i think it's going to be more meaningful. but it's impacting already with a thousand-plus new customers. >> all right. >> giants have had a lot of success in recent years, b.j.

i mean, this is not a bad thing. you know what i mean? you've had more success than any other team really should have. and i think it's nice that the cubs -- i'm sorry, but -- are you okay with that? >> i'm very happy, you know, growing up in chicago that the cubs are in it. >> oh, you did. so you were torn. all right. >> yeah. i'm happy for the cubs. >> okay, good. all right. they have, giants win every year it seems like. anyway. the beards and stuff. all right. thanks. when we return, vladimir putin speaks out on the u.s. economy. we'll bring you his comments next.

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with earnings season kicking off, some of the biggest transports will begin reporting next week. joining us with a look at the sectors, chris wetherby from citi. thanks for being with us. >> thanks for having me. >> what are some of the things being shipped these days making a comeback? and how does that educate us about who's poised to do best? >> so what we've seen over the course of the third quarter is

improvement in the bulk commodities. things like grain is moving, coal is worse, but has moved up sequentially. the industrial side of the economy kind of feels it's a little flattish, but stable. and then consumer side also kind of flattish. took a little dip down in september. that might have been some impacts with the shipping lines we heard about. but generally speaking it's been bulk. >> for rails, ksu, it's obviously half mexico story. is there political risk embedded in this stock? and will there be an overhang because of that? >> yeah, there is. i think it's obvious when you look at the relative underperformance of the stock, when we see polls kind of moving around a little bit more in favor of donald trump and we've seen the impact on the peso, there has been that overhang. we've talked about it. i think as we move forward here there's potential for that to lift. obviously we need to get past november to see how that plays out, but multiples have collapsed in the rail group. ksu generally trades at a solid

premium, right now it's pretty much in parody. >> and csx today what are you looking at? >> i can't talk much about csx, i think more generally speaking for in line earnings, this is the first quarter in a while we haven't had to wholesale lower our numbers from the group. i think from a second derivatives we are seeing improvement. >> best poised for holiday season? >> i think when you look at holiday specifically the group that still has a big peak on the holiday are the parcel guys, fed ex and u.p.s. fed ex is one of our favorite names in the space. you'll see a lot of volume moving in the month of september. >> their most recent call didn't they say trampolines was singled out. >> they call these noncompatible volumes that can't move through conveyer belt systems. that has seen enormous growth over the last couple years. essentially no one really wants to move these things so they're

putting them into the parcel networks. they're raising price but not pulling back. we're still seeing growth in that. we took a tour of a ground facility last week and we did in fact see trampolines and other large products being put together. >> did you get it shipped to you? >> yeah, a lot of people have them. kids love them. >> excicited on a call, it's go be big. chris, thank you. >> thank you. >> still to come, president putin on the election and csx chairman michael ward will be on at 4:00 p.m. eastern time. you're watching "squawk box."

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russian president vladimir putin speaking right now at an economic forum making some comments about the u.s. election and answering questions from cnbc's own jeff cutmore. here's what putin had to say about russia and whether they'll work with the next president. >> translator: the united states is going to make the choice that they believe is important giving any outcome to work with any president of the united states regardless of who's going to become the president. if the president of the united states was to work with us.

then we believe this is a weak stance. ten years ago nobody remembered about russia. nobody wants to speak about it. everybody said that it was second rated power. today, the main issue in the election's campaign is russia. well, that's rather gratifying but not completely. why? because all the members of this process exploit this agenda. and they poison our relations. >> so sort of interesting response there kind of patting himself on the back for increasing the importance of russia in the conversation but not happy that the comments aren't positive towards russia. all right. let's get a final check. we have only -- fun, fun, thank you both. >> it's been a pleasure as always. >> you here tomorrow? >> no. >> you're not either? >> i don't believe so. >> it's a big unknown.

>> not out of choice. >> i know. i know. >> look at that devilish number there down 666 on the dow. what'd you say? oh, both of us. both of us. anyway, thank you, wilf. we know we can call on you when needed and melissa. >> absolutely. >> make sure you join us tomorrow. "squawk on the street" is coming up next. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with kayla tausche, mike santoli at the new york stock exchange. jim and david are off. steady market. we're going to see if it stays that way. watch for volume on yom kippur this afternoon. british pound getting some relief, tension deserved as well after hitting highest levels almost since memorial day. road map begins with what to make of yesterday's big drop in stocks, how should you adjust your fourth quarter outlook? >> and yum brands layingut