positive. nasdaq down two, s&p down half a point. >> thanks to taco bell. >> taco bell, they were on the time when oil turned around. that's a miracle. >> that's no small feat especially on a monday. >> thank you, sarah, for coming in this morning. >> thank you for having me. this was fun. >> make sure you join us tomorrow. in the meantime, "squawk on the street" begins right now. ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. we set the table for a jam packed week of earnings. 80 s&p companies will report. the last presidential debate, fed speak all week long. europe with mild losses at the moment and ten-year's come back in from 1.8 on friday as empire had its fourth straight miss. road map begins with a big beat for bank of america. shares are up on strong trading results. >> goldman says apple should go

big in content with the launch of a prime-like service. >> and pepsico's new pledge to slash calories in its beverage. sarah eisen's exclusive interview with the chairman and ceo indra nooyi. bryan moynihan says revenue growth, risk management, cost down three, trading revenue up 18, fic trading up 39. numbers not quite as good as jpm's but better than citi in some cases. >> yeah, book value of $17.14, impressed by expense control here. really excited about the wealth management growth. there's a lot here to like. and it's not like the old days where talking about the justice department has decided to crack down on this or that. and by the way, oil and gas literally seven months ago we were worried about losses. no, big drop in worries about

the non-performers in oil. so this is a clean quarter. the problem of course is that this market is -- you need a rate hike, but if we had a rate hike then the whole market goes down. and we got stan fisher speaking at 12:00. you know, stan "sell them" fisher, that's what they're calling him now. >> we got decent numbers certainly from jpm and then wells and citi, but the stocks didn't really after a strong beginning they did not follow through. >> oh, it was horrible. j.p. morgan a downgrade today on valuation. valuation. these stocks are back to where they were maybe in december. and i've got to tell you, citi is substantial discount and they had a great quarter. >> i don't get it. everybody's had a reasonably good quarter if they've been big enough in the markets. let's put wells separately. wells a separate issue. and the rate hikes -- rates may go up, which is going to help net interest margin. what happened? >> i don't know. i mean, i did a lot of work on citi both before and after the quarter just thinking what did i

miss, what did i miss, what did i miss. it was a fine quarter. big discount to book, buying back a lot of stock. but i think this cohort is a jinx cohort. i think every time i get excited about bank stocks, i get my head cut off. even in the end i think citi was great ran from 45 to 48, there's nothing left. j.p. morgan not only is the fortress balance sheet, but what would you call it, david? kind of like a je bralter. >> yeah, that's the next thing that comes to mind. >> kbw takes wells to market perform on the notion that they thought minor changes might be enough to fix the changes. they no longer think that's the case. >> when you get together with people, say you're talking football over the weekend, say, geez, the giants look good, but how about wells fargo? this was it. this was the breakout scam. people just hate wells fargo. and i don't think it goes away very fast. i think the taint reminds me of

the taint bank of america had forever where you just said, you know what, you don't know what's going to pop up next. more hearings, subpoenas, it's on the griddle. and i think that wells hurt the whole group. >> you do? >> i really do. i think wells hurt the whole group. >> that makes sense it might. sentiment wise, yeah. >> once again we're in a situation where like the government's going to play a role. and i just think that even though you have tremendous fixed income growth for bank of america, i mean it's really pretty amazing. >> up 32% in sales in trading in terms of -- >> that's fabulous. >> that's a big number. equities down 17%, but still. >> right. >> they've never been a big powerhouse in that area. >> no, they haven't. but this wealth management business, when they get it right -- by the way, when you look at they're not going by accounts per share. they're trying to get as much money per guys who open accounts. what a great business to open a checking account and they pay you nothing, right? they pay you nothing in your checking account. so you raise rates, you got to buy bank of america's number one

deposit base in the country. but you know what, at the same time we are in some sort of funk. i was going over jimmy carter's famous may less speech -- doug oeb o o oeber oberhelman out at caterpillar. board elected jim -- the journal runs a front page story. >> oh, the front page story. >> it sounded like an o bbit. >> yeah, i think it did sound like an obit. easy come, easy go. i think a lot is behind him. this is incredible. doug the last few quarters -- frankly i know they weren't that great, but the lay offs have made it so they're making more per tractor. i don't want to say anyone deserves better because this is a world where what have you done for me lately. but that article today was

really a rehatch of a lot of things caterpillar did wrong a long time ago and i think they've recovered from it. >> right. >> group president responsible for energy and transportation, looks like he's not going to be chairman. david calhoun is going to become non-executive chairman, ed rust will remain on the board. these are big changes. >> geez, this is huge. i got to tell you it's kind of unceremonious. they're about to report. i mean, this is like firing head coach with a couple games left in the season. >> it is. although they will say it's not firing because of course he's elected to retire effective march 30. it's a five-month period in which he'll be able to pass the baton. >> i thought this was going to be a good quarter. and i am surprised about this. >> that worries you? >> worries me about the quarter? no. >> the fact he's retiring in march you're worried about the quarter? >> no. i don't think you send a guy packing if the quarter was fabulous, but he took expenses down and, yes, in 2010, he made

mistakes. he's had to pay for those mistakes for seven years. time to get him a get out of jail free card. but, wow, i find this shocking. right before the report. >> well, between stumpf -- two of the largest names at two of the biggest companies ahead of earnings season. >> i mean, stumpf -- i want to go back over for a second. john stumpf ran a very good bank. and you go over bank of america and it's true bank of america is trying to get as much per account, but not open as many per account. still so many questions open at wells fargo. but caterpillar, this stock has been a horse, been one of the best performing stocks in the dow. >> it's the best dow stock of the year. >> and now? they choose now? but he has a board that's a top board. did you know he's got a real board? >> he's got a real board, yeah. listen, you never know what's behind this. how old is oberhelm, do we know? he's been there 41 years at caterpillar. it's not as though he's out immediately, which immediately

reads like, okay, something was really wrong. no. but it doesn't also read like your typical succession. >> he deserves better. >> where you oftentimes -- no, even in the case of wells you knew sloan was the guy most likely. you just thought it was two years hence. >> right. he's 63. >> who? >> stumpf was 63. >> yeah, stumpf was 63. >> but break form here, i didn't get to talk about the great quarter at hasbro. i'd like to know more because i felt this was going to be a very good quarter for doug. i think he's done so much to be able to recover. the cost structure that he's taken out. and i think -- i know this is a lot of stories about china and the ridiculous overbuild. i don't know, i think china was coming back for doug. he put a lot of the bad stuff past him. let's see. i'm sure the stock will be down because people say what the heck's going on there, right? >> a 35-year veteran, will become ceo january 1 and then

you'll have the change in chairman, i believe. >> all right. so they give him some time. maybe it's not -- >> then the chairmanship will be given up by mr. oberhelman to dave calhoun. >> i think doug has done a very good job last couple quarters taking a lot of costs out. >> you changed your tune on him. >> because he did better. hey, listen, if this guy was still in last place, you know, hey, i'd slag him. but the guy -- the guy was in the playoffs. the playoffs. >> we'll cover caterpillar all day obviously. move onto apple, goldman out this morning suggesting apple go big when it comes to content. the firm saying apple should launch a $50 a month subscription bundle including the iphone, apple music, apple tv, original content and potentially live sports. goldman believes such a strategy would position apple well versus amazon and alphabet on a day where ihs has some figures on the dollars netflix and amazon is throwing at new content $7

billion. >> i know. but i thought this was an excellent piece about apple. i thought it was really interesting. not talking about raising rates, they're turning upside down saying, listen, make a lot of money in the rates or give you a break on the blades. it was very important. now, by the way, one of the things i flew last night, i didn't look at anybody because the galaxy note 7, you're not allowed to have them. so suddenly i look and it's all ios next to me. >> no face mask and rubber gloves? you were okay? >> i didn't wear the face mask or rubber gloves because the faa has woken up to this issue. at the same time this is a piece which says, listen, tim -- tim cook, this is your chance to make a ton of money, but i don't think they're going to do it. i think that they have this piecemeal thing where you pay them -- i don't know when you pay your bill do you even bother to look at it? >> i do sometimes. i look at the verizon bill. >> don't look at the verizon bill. it's too scary. >> it is scary. >> you ever look at your verizon bill? it's like a car.

>> i'm like what's going on? who's been texting? >> the family verizon thing, i mean, there should be -- verizon is without a doubt a company that reports this week they know how to make money off you. and i don't think the aol thing, that isn't what moves the needle. what moves the needle is the family plan, you know? >> it does. this apple thesis is sure to just start at some point expect that, oh, they're going to buy media company. it feels tailor made for like bankers to go out and start pushing that idea again. >> that doesn't happen, david. the research guys don't talk to -- remember that spitzer settlement, that doesn't happen anymore. >> no, it doesn't. >> chinese wall. >> i'm not saying that it happens, but it's going to -- >> but i think, look, the report's great. i don't think tim cook's going to do it. i think you owe him this stock because of the problems with the galaxy samsung note 7 and the switching which turns out to be a lot easier to do. that's why you own the stock. that's it. >> also bloomberg saying they've decided to give up on the car for now.

hundreds of layoffs they're citing. >> wow. >> on that project. more on that later. when we come back, sarah eisen's exclusive with indra noyyi, what the pepsi ceo is saying about the price line, m&a strategy, look at the premarket, s&p has gained alternate gains and losses for zempb sessions now. back in a minute. alpha seems more elusive today. is it because so many go after it the same way? chasing after short term returns. instead if getting caught up with the crowd, the investment managers at pgim take a long term view, teaming specialized active investing with risk-management rigor, to seek out global opportunities. we manage over a trillion dollars this way, attracting many of the world's leading investors. partner with pgim. the global investment management businesses of prudential sprint? i'm hearing good things about the network. all the networks are great now.

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busy week for macro e con data, some housing data later in the week, empire this morning and now imp. let's get to rick santelli. >> yeah, september ip coming in a little light, up 0.1, we were looking for 0.2. we did lose another tenth on a revision. august moves to minus 0.5%. utilization rates we were looking for around 75.6, we end up with 75.4. and last month lost 0.2 to 75.3. listen, it hasn't been a great year for the utilization rates. as a matter of fact, the low read for the year is 74.9, the best read of the year is 75.9. so you can see it's been in a pretty tight range. as carl mentioned the most hot

read we had was the october read this morning on empire. you know, manufacturing around gotham not looking so good down 6.8, so we'll continue. there's more data to go on the inflation front. the word of the week, stag flags carl back to you. >> rick, thanks so much. rick santelli, talk to you soon. pepsico rolling out a new sustainability agenda, a push to offer healthier foods and beverage choices. company plans to reduce sugar, salt and fat in its products. our sarah eisen sat down with chairman and ceo indra nooyi in exclusive interview and asked about a pullback in the stock after what was a pretty strong quarter. >> in the long term the stock will come back. again, we're going to deliver the numbers. we're going to deliver great top line and bottom line performance. it's got to be balanced. i think hitting the pedal on one or the other is not a very good thing. our performance is balanced. good top line growth, good bottom line performance. we're just going to keep focusing on that.

we cannot control the markets. we can perform, we can tell our story. the rest of it is whatever happens to overall. >> when it comes to m&a and the industry, nooyi says there's room for deals to be made, but not megadeals, at least at pepsi. take a listen to that. >> i think when you have so many mid cap and small cap companies there's room to take out some more costs. i think as a large cap company ourselves we are at scale. we're efficient. and if we need to do something from an m&a perspective, it will be small tuck-ins to fill out, you know, white spaces. i don't think there's any need for an almost $65 billion company that's present in so many countries to make any megadeals. >> sounds like we're a ways from doing another quaker type deal. that was a long time ago. >> yeah. it does -- look, i think indra has a very good portfolio. i can't say enough about that snack business and how it is the big driver for supermarkets. supermarkets are downright now. they need the cash flow.

lays has been great. the whole aisle. and the good for you obviously that they are starting to make those into billion dollar businesses, that matters too, sabra. so i have the press drinks but i feel there's m&a in that business. i think that is not done because there's not a lot of growth in the center of the store. >> right. perhaps m&a not involving pepsico. >> not involving pepsico. >> perhaps involviinining mondo wanted to buy hershey, that didn't happen. >> by the way kraft heinz stock has been okay. they've got some currency. they can do something. >> they're still finishing up their sort of -- or getting -- >> right. >> -- the final stages of the consolidation amongst the two companies. >> these companies have no growth. people have to understand pepsico has actual organic growth. a lot of these guys don't have organic growth. >> how much is the liability of

the dollar going into this earnings season? >> well, you get a proctor, proctor spent a lot of its call talking about currency and how to understand the inner play, you know, that you get. kimberly clark, that's got a lot of international too. this group, kellogg, big international business, but i think really it's tech that you're going to see have to explain the dollar. the dollar versus the euro is going so the right way. and when you have stan "selling" fisher speaking at noon, that could send the dollar further up. >> yeah, dudley on friday all but basically saying december, right? just like rosengren the day before? >> we're building in a rate hike. that's one of the reasons i felt the bank stocks shopt have come down on friday. building a rate hike that's the group to own. but again, i do feel very strongly that wells fargo makes it feel like that the government's back. and the government -- the combination it was like we had a bernie sanders tweet at quarter of 4:00 that hurt the drug group. i mean, twitter, geez, it's so

much easier to just pound companies with twitter than anything else. but, look, i think pepsico already reported, it was a great quarter. not thinking about them, but yes, going ahead we are going to have to worry about the dollar particularly for companies with giant european exposure, which there are many. >> cramer's mad dash, take one and make alternatives a core part of their portfolios. translation? goodbye 60/40, hello 50/30/20. ♪

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all right. we got about taking a peek there call it seven minutes. like to let people know how much time until the opening bell. >> absolutely. very important. >> it's a monday. we're all kind of getting started here. now we got our mad dash. you want to go hasbro. >> i want to go hasbro. first of all, great quarter. but second, when it had its breakdown, it had a july breakdown okay right here, the quarter was a good one but people didn't like it because they had some problems with some girl stuff, some of their girls toys. that's really been changed. this stock though cannot -- look at this. this is a very interesting pattern we've seen so far in this third quarter results. is it a company reports a great quarter but does not get back to even. it struggles. now, i think brian goldner, who will be on "squawk box" tomorrow, has always told a good story about narrative and why people should own, the long-term

girls thesis here for toys, david, it's a great quarter. >> you're raising an interesting point. now, it's early, we still haven't gotten earnings from the vast majority of companies. >> right. >> but so far to your point, they don't seem to be moving the needle even when they might be better than expected. what does that say about the broader market, anything? >> oh, i think it says a lot. i think it says people want out, they want out ahead of the fed. i think they want out ahead of the election. i think people are very nervous. the consumer's not doing that well. my issue, david, is when you report a big upside surprise and things are really great and you don't get a big move in the stock, that emboldens short sellers. say, look, is this the worst that's going to happen on a great quarter? why not -- i mean, i see some pieces saying today sell the banks. the banks were good. it doesn't matter. that's usually a bad sign for the market to see that kind of on better than expected -- >> 3.9% is not completely on. >> let's see if it stays. do you remember how strong the bank stocks were ahead of the

open? >> that's true. they looked to be poised for a strong day friday and did not end that way at all. >> it folded. >> but they're banks, man, they're banks. >> well, hasbro -- >> r.o.e. still barely double digits. >> but this is a good number. they have a lot of inventory for christmas because, don't hold it against them, it's what you need if you think you're going to have a good quarter. they're optimistic, i like that. goldner is good. >> all right. we got an opening bell on monday the 17th of october coming right at you.

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you're watching cnbc live from the financial capital of the world. 80 s&p companies will report earnings this week. we've already gotten b of a on the tape so far today, doug oberhelman of caterpillar, macro data to come and fisher at noon and going to continue almost every day. >> i think people are concerned

the gross domestic product estimates keep getting cut at the same time the fed wants to raise rates. it's not like business in the country is going in the right direction, but if you have this strong ideological push that it's a time to raise rates at a time when the dollar is going up, all these things are building in the rate hike. we've seen that before. the market can't handle rate hikes very easily. it can't. i know there are a lot of people who get excited, we get excited to see some good earnings, but overall a rate hike is still not good for stocks no matter what you think. it's just not. >> we've had 34 companies on the s&p so far report for the quarter. of those more than half have seen the q-4 estimates cut, 62%. >> that's telling. i do think that so far, i mean, we're about to go into the teeth of earnings so i don't know. there is a stock tech resources, recommended delivering alpha, couple upgrades today. i think that people still want

to buy china export -- companies that export to china. which is why i'm so shocked about caterpillar. i'm shocked. >> let's get to the opening bell and the s&p at the bottom of your screen. at the big board this morning flex shares celebrating fifth anniversary of its etf launch. over at the nasdaq, bnc bancorp. >> there was a time when you used to look at these bank stocks in america, bank of america, wells, who were they buying next, they can't buy anybody. that also hurts growth. there's not a lot to. >> no, consolidation ended. i mean, the regionals you could still make an argument there still might be a deal to be done although we haven't any deal of size in banking in many years. >> but the key -- >> it was such a long run. just when you look at what is j.p. morgan, what it's made up of, whether it's manny hanny and chemical and first chicago and chase and j.p. morgan. and i'm forgetting a bunch along the way. >> it is.

>> they're all one bank now. >> it's incredible. some of these companies just on the cyber security spend alone. and then on the -- just regulatory spend. but that's why i was so impressed with bank of america. the expense structure there is so much better than it was three years ago. >> bank one, i forgot bank one. that was also in there too. >> that's when jamie dimon was prime. >> yeah, chicago boy made good. >> yeah, that's right. >> well, he was here and then there and then back. >> we'll watch wells fargo down to 44.50. >> geez. >> on the downgrade from kbw. we did mention deutsche bank. some reports looking to shrink their u.s. footprint. german newspaper argues it could be part of a settlement with the doj. >> i think you're hearing a lot of rumblings that because they have pulled back things can get a little better in the united states. there have been several forays by european and japanese banks into our country to take a lot of business. and they don't charge as much. and almost every time it's

failed. >> they do not tend to succeed. i mean, if you're a deutsche bank employee here in the u.s. and you've watched the stock go from 30 to 13 and you got a lot of comp in stock and potentially retreating from the u.s. market, it's just been ugly. why are you going to stay? how are you going to stay? so you get this idea they're losing great talent and things like that. they were in power for a little bit. >> oh, geez. >> they took amazon public, didn't they? >> look, if they hadn't got -- you don't get in trouble if you're nobody. they were big in the houses. >> but you're right, i remember when i started covering banking in the late '80s, the japanese banks were everywhere, mitsubishi, long-term bank of japan, sumitomo. >> right. tried to get business -- remember french banks came in? you covered those in middle school. you were a middle school reporter. >> yeah, middle school reporter. >> it's amazing. i waited until i got out of

goldman and -- >> hedge fund banks, oh, my god, they dpot their heads handed to them. >> it's true. it was always incredible. the swiss banks, they'd always come in and cut rates and they'd say we're going to do all this business, and then a few years later there were nowhere. and this deutsche bank, i mean, if you weren't there, are you picking up the paper and saying, hey, i guess wow they're downsizing. but where do you go? i see people want to get in this industry and say, jim, where can i go to get in this industry. i say, geez, nowhere. nowhere. morgan stanley reports this week. maybe they're hiring. i don't see a lot of banks hiring. >> yeah. difficult time. coming out of hbs used to be headed straight to financials now it's all technology start-ups. >> head out west. by the way, stanford. >> it's stanford heading out west, it's machine learning. >> cal tech. machine learning, david. it's all about virtual and augmented. >> a.i., machine learning and eventually the machines will

take over for the wall street firms and hedge funds anyway. it will come back. >> there's a number of amazon, another number bump today. why doesn't amazon have an exchange? hey, you know what, honestly i've said that before. if you like exxon, you might like chevron. other people who have ordered bp have also ordered stat oil. >> which you consider is much lower multiple stock than the one that you are buying. >> and then how do you rate bp? >> yeah. we'll change your cart. no problem. >> jim, ibm is up. one of the best performers today. they do report tonight. actually now it's the top dow stock. what are you expectations? >> you know what, there's been two elements of ibm. there's been the bottom line, which has been good. and the top line, which has been weak. they have spent a lot of money on watson, which is -- >> a big piece in the times this morning about their bet on a.i. >> yes. look, everything's been a push for ibm until they blow out the revenues. remember, you've got a lot of

their business that is fast growing, but you also have more business that is shrinking. so it's always been this foot race. will this be the quarter that the fast growing does more? i have to tell you i think one day the fast growing has to be a predominant, not just a big percentage. and so therefore it will be inexpensive and people will buy it, bid it up and then a few weeks later people say i want real growth go buy nvidia. >> 4:15 or so we'll get earnings from ibm, 5:00 which will be very important. >> are you on it? >> i bet you will. >> i'll be on that call. >> why not? >> that is martin slo iin schro the call, straight shooting guy, very conservative. they have a lot of currency, too, by the way. this currency's going to be jarring for them. >> want to mention the kim china

s cegenta deal. you were talking about a 465 deal, roughly, some reports out of china that had chem china, another state-owned enterprise getting together with chem china. now, a lot of u.s. based investors of course then using google translate to try to understand some other things that have come out in terms of clarifications which say upon inquiry the actual controller f of -- controlling shareholder of the company and the company did not receive any written notification from the relative government departments, nobody is helping it understand, if you get together you might need another review of the deal at the very at least would delay it if not represent more concern. and so you've seen syngenta trade down friday on the rumors. i don't know it's true or not.

say it's rumors. >> but it is interesting now when you hear about a deal one of the first things you'll hear and they'll probably be not an easy regulatory review. >> there won't be, but this one they already went through it to a large extent. but china's very hard to understand. >> oh. >> they are huge companies but potentially getting together at least according to some publications in china, although others saying no. >> i don't know. i keep thinking about all the deals that are not going through. just so many deals. >> i was just going to ask about twitter. six-week low. >> oh, geez. >> just below 17. we know what happened on friday. what happens now? you were up this morning, again, preaching on the dangers of trolls. >> i think people have to understand that a lot of the people who dropped out of the bidding -- by the way, cannot short stocks, cannot own stocks, i have to say that because people feel i was instrumental in saying bad things about twitter. what's happened is a lot of the bidders are looking at people with lots of followers and seeing the hatred and not really

sure. twitter say, listen, we have a filter. i mean, the filter filters out a very small amount of the haters. and i know that the haters reduce the value of the company. i know people don't want to believe that who are on twitter because they all just say, hey, hang in there, hang in there. i mean, hang in what? to get your head handed to you? i know that salesforce was very concerned about this notion. they want people to come back. they want people to see it's a news play -- a place to get news and what they really want is data. and they really fear what's happened is the people of twitter have cut back developers, cut back developers, kind of a yahoo story. and it makes it so that they're less likely to pay up. >> right. well, october 27th is when we get earnings from twitter. benioff quoted by the ft, just decides to come out and tell them, we're done. >> it's amazing. >> after he advertised loud and clear they were interested for quite some time. and they were interested as soon ago as early last week. >> no, i went to try to match

that story and benioff came back to me and said, well, the implications of the story are correct. i said well the implications of the story are you're not interested. not a lot of implications. >> was he surprised at the vitreal he received from his own shareholder base? >> yes, from fidelity and tr. rowe, once again, i won't go to twitter today. >> what do you mean? >> i won't look because i said something negative about twitter which therefore makes me public enemy number one. >> so you will not engage with twitter today? >> people say cramer wants twitter down. i don't want twitter down. but that's what people are going to say. and that's part of the problem. if you're anybody who has a big following and you say anything controversial, the haters will drive out. that's gresham's law. >> no doubt, i had it too, same thing, questioning our integrity whether we were trading the stock -- by the way, we can't own stocks.

>> we can't own stock. it's tiresome. i find it tiresome. so i won't go today. i'll look at it tomorrow when i go to make my fantasy changes, try to figure out a quarterback to maybe do a little better there. >> that's going to hurt, i mean, if that happens at scale, that's a happen per tweets per timeline. >> mentioned they thought someone else could come up with something better than twitter that would be more pleasing to the people who tweet a lot, or maybe there would be a service to twitter that would make it so people who tweet a lot or have a lot of followers would be more protected by the organization. instead it's a free fire zone. when you go out there it's like the first day of the psalm, 60,000 british soldiers, hetheye shooting at you. machine guns i'm coming with the horses. >> forget to mention washington mutual and behr sterns also part of j.p. morgan. round that out. and somebody reminds me deutsche bank includes alex brown, which i remembered, and bankers trust,

when they did that deal? >> i remember when deutsche -- boy -- >> great sale by bankers trust. >> b.t. wasn't doing that well at that moment. >> yeah. >> the consolidation that went on before the great recession was amazing. >> incredible. >> but it's interesting j.p. morgan was such a fine quarter and to see a very -- immediately i don't want to say valuation's too high, i mean, these are such expensive stock. they act like the airlines. i went over that quarter last week, they're really talking about terrorism and the decline in european -- european was so bad. transatlantic is so bad right now it's really shocking. it's shocking how bad transatlantic, transatlantic flights are. and it's always mentioned as terrorism. >> and some smaller carriers eating away at share. >> yes, coming in underthooneat making so gross margins aren't that good. there's a lot of skepticism about the group, but the group was starting out a bit of a move, but not enough to bring it

back to even. and that's the same thing you hear over and over again. southwest air's been doing quite well. >> netflix is down ahead of earnings tonight. there's a cautious ahead of the tape in the journal talk about short interest. >> yeah. you know, i think that the u.s. got to show a pickup, but the stock's had a very big move went from the 90s all the way up to the low hundreds. but it's up to domestics. and i think it's very hard to gain. this is a company by the way everyone tries to game and it's not panned out to try to figure out what they're going to do. and frankly i got to tell you the conference call i always find a little confusing. just a confused conference call. >> really? >> yeah. you leave it thinking, geez, are they -- do they like how they did? do they not like how they did? it's not like a lot of companies where they basically say, listen, it was kind of like the honeywell, first cut of honeywell where they basically said we're not so hot. and then last thursday on "mad money," hey, we are good.

i mean netflix is a very hard stock to understand. >> right. last quarter of course the stock got hurt, but they said it was because of ungrandfathering. >> that's what i meant about -- >> not because of competition. >> but didn't you find that hard to understand? google ungrandfathering didn't have it as a listing. >> i don't think you can be ungrandfather ungrandfathered. >> it's biological. how do you get ungrandfathered? >> you don't. i'm sure you don't want to. >> maybe they were adopted, i don't know. >> dow's down 23. ibm leading the charge. let's get to bob pisani on the floor. >> good morning, carl. happy monday everyone. fractionally lower in europe. take a look at the market sort of mixed here, banks leading the way once again. remember that happened on friday and loss materials up and sort of mix health care, tech and either side of positive, negative same thing. bank of america starting up on their beat there. goldman sachs is tomorrow remember. regions financial, some of the

regional banks if you put them up, they're trading on the upside, comerica, goldman, some others. truckers are coming in so we've got j.b. hunt, which missed on earnings. we're getting a little pressure on some of the trucking stocks down here fractionally as you can see here. you know what the problem is with trucking, we've talked about it for a long time here, excess capacity. we have lower pricing. and we have higher driver wages that's been around for awhile. it's been costing them. you can see this with hunt, they do a lot of intermodal, moving stuff between railroads and trucks. you can see numbers, revenues were up 2% on the intermodal, but the revenue per load down about 4%. that's what -- that's the lower pricing you're seeing there that's affecting them. and see income down 7%, that's slower pricing as well as the higher wages that they're paying their drivers. so you can see this very carefully and clearly with what's going on with j.b. hunt the pressure of their side of

the business. schwab also reported, largely about assets under management, they are attracting a lot of new business. they have 10 million brokerage accounts, that's up 4%. that's a new record for them. advisory services which can charge more money because it's advisory up 14%. that's a lucrative end to have the business as well. take a look at all of these, may not be exciting but bottom line the company continues to attract new assets. they have become one of the lowest cost providers of exchange traded funds. and they have muscled themselves into the etf business. they are now, i believe, the fifth largest etf provider out there. from nothing a couple years ago. so kudos to charles schwab. i don't think there's any trading when issued share. authorized but not yet issued, spin-off will be completed october 31st. we're going to have two stocks on november 1st, yum and yum china. there's a lot of interest in yum china. i mean, more than you might

think. this is a pure play china consumer growth story. so a lot of people want that. it's the biggest restaurant operator in china. the restaurant industry there is considered to be underdeveloped, mostly local competition. so they've got a huge infrastructure and the hope is this is going to aid their growth overall. by the way, this is like alibaba this is entire u.s. listed, no hong kong, no mainland china listing at all. it's all going to trade down here on november 1st. as for what's left, the new yum, which will exclude china, they're going to be getting fees from china. they'll also be in many emerging markets just as they are now in brazil and other places. they're very highly franchised. the theory is they'll be less capital intensive because they'll be so highly franchised. and the theory is it's going to be less volatile. we'll keep an eye on all that so yum will be trading off of yum china. and of course everyone will be getting one for one split here

with yum china, equal amount of shares, new yum equal amount of shares and i believe around $61 and $28 you add up you get what is currently the old yum that's trading right now. so the dow, guys, right now down 27 points. back to you. bob, see you in a minute. bob pisani. let's get to the bond pits as well. rick santelli at the cme. good morning, rick. >> good morning, carl. walking on the trading floor is so interesting on a monday morning. i don't hear packing in the rate hikes. from what i hear, they're packing up and leaving the hotels built for investors by central banks. there's a big difference there. they're not getting ready for what they may do. they're leaving what they already did. think about it because it's going to effect strategies. you know, tempting inflation, pricing pressures haven't built

because the world's in a float of excess capacity. the downside of globalization. but if it does pick up, inflation might be too good of a term. t two-day of our ten-year, open to beginning of june that's where we're hovering. look at a two-day of gilt talk about a rate made up a lot of ground quick, it touched 1.22 briefly. it's pretty much gotten everything from where this chart starts, brexit, when they voted to leave and everything changed dramatically. we're back basically where we were pretty much before that. if we look at bunds, this is fascinating. bund yields, this is since the day before brexit, we're not quite there yet, but watch out. just like going through 90 you went to 1.22 fast on a gilt. the technical nature of '08, '09 basis points has been a topper in bund yields. they will go higher because there's a lot of people offsides should they close above that. and then of course the dollar index. down here there's a little

phrase they're saying, it's the 100-yard dash, meaning most think that the dollar index has enough propulsion to get back close to 100. carl, back to you. >> all right, rick. rick santelli in chicago. thanks. still to come, a lot more of sarah eisen's exclusive with pepsi's chairman and ceo indra nooyi. dow begins the week down 32 -- 33 points. back after a break. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

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morgan stanley today marks the fifth anniversary of "halftime report" with scott wapner. they've got an all-star lineup all week long, david tepper, carl icahn, jeffrey gundlach, that's today at noon. later in the week, nelson peltz, jim chenos, a lot to look forward to. >> oh, definitely. remember nelson peltz, remember he was involved with pepsico, would like to hear maybe thoughts about hershey, what's going on there. >> he's on mondelez's board,

right. >> yeah. so i think that could be some fireworks. tepper's always been a provider of fireworks. >> we can't wait to hear, get the judge at noon. we'll get stop trading with jim in just a moment. on here? i'm val, the orange money retirement squirrel from voya. we're putting away acorns. you know, to show the importance of saving for the future. so you're sort of like a spokes person? more of a spokes metaphor. get organized at voya.com.

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time for cramer and stop trading. >> we were talking during our mad dash about this kind of time -- sign of the times which is a tough one. wedbush downgrades time warner from buy to neutral. this stock is up 23%. they've done everything right and they did a pair trade where they were against viacom and turned out to be a great trade. but the fact is they're saying the tv centeric thesis likes more like the seventh than second inning. delivered over and over again and there's no respect for guys who deliver right now. they'd rather recommend stocks that could get taken over because ceo hasn't delivered. so i just point out that this is all part of this on we i feel every day ahead of the fed even if you get it right you're downgraded on valuation, j.p. morgan downgraded -- >> do you think the election has anything to do with it? >> i think it has a lot to do wit. we had a man who founded zoe's kitchen, successful chain

talking about the -- i went back over that speech, i feel there's a crisis of confidence keeping people from doing what they normally would do. rather remarkable time in terms of just the muted reaction to great companies reporting great numbers. >> yep. what's on mad tonight? >> we're going to deviate a little. we've got a person who's reported some decent numbers. we've got the head of girl scouts. we interviewed when we were -- don't laugh. it's an $800 million business. >> wow. >> yeah, $800 million business. >> i'm trying to do more sustainabili sustainability. young people always say to me, what is that company doing to preserve the environment? well, that is no longer acceptable to the millennials, they do not care about beat and raise, they want to know whether apple's footprint has gotten smaller. i remember when i was there it was a dr. scholls cushion now it's for real.

>> see you tonight, jim, "mad money," 6:00 p.m. when we come back, sarah eisen with indra nooyi, don't go away.

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♪ good monday morning. welcome back to "squawk on the street." i'm carl quintanilla with sarah eisen and david faber at post nine of the new york stock exchange. market down about 36 on the dow, s&p off more than four ahead of a busy week of earnings, fed speak and data. watching the ten-year as well which has come back in from that 1.8 level on friday. our road map for the hour begins with a huge shakeup at caterpillar. ceo and chairman doug oberhelman announcing he will retire after 40 years with that company. bank of america crushing earnings on top and bottom line. what that signals for the industry. >> and my exclusive interview with pepsico chairman and ceo indra nooyi as she lays out her strategic vision for the next decade. the company's transition to healthier products, the stock price and fighting off nfl ratings weakness all ahead. but first, we start with the

markets. we usually see a significant selloff at some point during october. that sets stock up for a stronger finish to the year. is this it? our mike santoli joins us with more. this sounds like a mike story. what have you found? >> we haven't yet gotten that significant shakeout in october that has historically led to strong december results when fourth quarter nirms are all in. basically the idea here is that a decline of at least 3% in october since 1990 when we're in a bull market has led to a stronger than typical fourth quarter rally. now, who knows why that is. is that because we basically shake out the weak hands, we get better values, get a little bit of a sentiment panic in october and then we have the comeback? it could be that. i do think and i say in bull markets is important because in 2000 and 2008 you had weak octobers, we were already down 10% going into october. those were bear markets and it got worse from there. so this signal didn't work. and for a counter example i would just go back one year. we had a very strong october in 2015. as a matter of fact, coming off

that summer shakeout selloff basically in late august when it got most intense, we came back. through october it was not a good set up. we basically topped out november 3rd and obviously led into the january and february panic. so maybe you should hope for a little bit of a deeper selloff some time this month. >> all right. mike santoli, thanks so much for that. for more on this and the markets we're joined by anthony chan, chief economist from j.p. morgan chase. jeffrey, chief global investment strategist at charles schwab. happy monday to you both. cramer was just talking about a malaise perhaps brought on by fears of election, weak confidence on friday, empire's disappointment today, do you see it that way? >> you know, i think what's going on in the background there's some fears about earnings. 27% earnings growth for companies in the msci global

index, that's way too high for the type of economic growth we see next year. i think that means in the coming weeks we could see downward guidance to analyst earnings estimates. and stocks have tracked those this year, could be fulfilling mike's wish for maybe a little bit of a downside pullback here in october. >> yeah, but earnings revisions to the downside is nothing new at the top of earnings season. >> well, that's very true, but i think this time rather than just looking at the next quarter or so this is out to 2017 it's been years since we've seen valuation growth, i think we're more vulnerable than we've been in awhile. >> anthony, do you agree with that? from the economic side of things 27% earnings growth next year, does that seem attainable? >> that's a big number. i focus on the other earnings number for the s&p 500, the consensus is about 12.8%. i look for that number to actually grow between 5% and 6%. and that actually is an improvement. we've had five consecutive

quarters of negative earnings growth, and now i see the possibility that we're soon going to see some sort of an inflection point. the financials have been doing very good, of course that's 13% of the weight of the s&p 500. the materials have done great but i can't get too excited because that's less than 3% of the weight. moving into next year i see that higher energy prices, stabilization in commodity prices will in fact start to raise earnings given that the energy sector is still a little over 7% of the market weight. >> financials have done well in terms of their earnings, but the question is are they trading on that or is it just what we've seen in the ten-year yield back up to 1.80, highest level since june? and is that the way to track whether financials can rally into next year? >> financials do very well when the yield curve starts the steepening. and we are seeing the ten-year yield picking up. part of that is global because you saw the yield picking up a little for the german bund, the 10-year rate and to some extent the yield curve control kuroda's

talking about. last year would have been a perfect scenario for the financials, but this is nonetheless a marginal improvement. >> yeah, jeffrey, it should be a good time for banks, but some were arguing this morning that wells is sort of thrown a blanket over that because you're not sure what sort of surprises could come from things as pedestrian as the retail bank. >> there are certainly some company specific issues. the whole sector is very much tied to longer term rates and a rebound in inflation. if the imf is right, not only has inflation more than doubled this year from 30.3% to 0.8% globally but to perhaps 1.7% next year. if that's true you can expect higher both maybe short and long term rates. that could be better news for financials. overwhelming the issues with deutsche, wells and maybe some of the other specific issues in italy. >> what's your outlook for gdp? >> for gdp we see that next year is going to be around 2%. this year obviously is going to be a weak number 1.6%.

a lot of people are talking about recession. but i don't see those conditions yet. consumer confidence you mentioned at the top of the show, when you look at the last ten recessions, consumer confidence university of michigan is still five points higher than the average right before we started recession. now, we've had two recessions with consumer confidence a little higher, which means consumer confidence is telling you about a 20% risk of a recession. then i actually looked at the gdp components and the number one component is residential investment. that was negative contributor to gdp, but it's only half of what historically has been consistent with recession nine months later. i put odds of recession next year at around 15% to 20%. >> what would you have to see to make that 15 to 20 higher? >> we need to see more reductions in consumer confidence. i know jeff gundlach has done some really excellent research. he looks at the moving average of the unemployment rate if it pierces that 12-month moving average and it did in the last month to 5% then he forecast

recession. i went back and looked at all the past ten recessions we've got. it's got a pretty good track record, but it's got about a 30% track record. so about 30% of the time did that that happens we tend to see a recession. so that would put the probability of recession around 30%. i'm more closer to 20%, but i would not quibble with the excellent research jeff gundlach has done. >> economics aside, jeffrey, the political climate is the big overhang right now. certainly a lot of investors are talking about it. health care moving to the worst performing sector so far this year. do you buy? are those concerns overblown? or do you stay away? >> elections are emotional. investing is emotional. we've got the combination here that can lead some investors to the propensity to make a mistake. i can think back to the brexit vote and how many people jumped out and then didn't jump back in as markets reconsidered outcomes there. i think there is some concern about the race tightening up as it usually does in october even though it seemed to have widen recently in the polls. and investors are positioning in

their portfolios. i think they need to look beyond that and stick to their plan rather than jump in or jump out or make bets based on various election outcomes. i just note the emerging markets have been holding up pretty well here despite the prospects for them favoring clinton over trump it seems historically given how trade sensitive they are, they are sticking to the plan. i think invest rs should do that as well. >> jeffrey, anthony, good discussion to start a heck of a week. see you later, guys, thanks. bank of america reported earnings this morning. it was a beat on both the top and bottom line. wilfred frost joins us now to give us a look inside the numbers. wilfred. >> good morning, david. yes, indeed, both on the top and bottom line more comfortably beating on the bottom line. like j.p. morgan and citi on friday, this was driven by trading revenues, especially within fixed income. cfo paul donofrio made the statement that fixed income built momentum as the quarter progressed and indeed continued into october though too early to

speak for the rest of q-4. however, equities were weak albeit not as bad as citi which highlights the macro driven explanation for beat in trading. loan growth 7% year on year on strong mortgage and vehicle lending this compares to 15% for j.p. morgan who are the outlies as opposed bc being laggard. on recent cross selling issue, d donoforio said they were always measuring controls and since this news come out they've redoubled their efforts. they've not found anything that concerned them so far. the bank's still on track for target of $53 billion in expenses by 2018. and on rates they said that 100 basis points hike would be worth $5.3 billion to the bottom line over a 12-month period. they continue to be very proud of their mobile and digital takeup adding 1.1 million mobile users in the quarter to a total now of 21.3 million. just have a quick look at share price to finish things off because we had been up around

1.5% in the premarket. since the open we've slipped now down just about flat. nothing really in particular to point to, just a slipping of the market as indeed of course markets are in the red this morning, guys. >> yeah, maybe a runup into those results from friday. wilfred, thank you. when we return, our exclusive interview with pepsico ceo indra nooyi, why she's transitioning the company to healthier products. some aggressive goals on that front and how it will impact the bottom line. plus, a shakeup at caterpillar. we've got the details on a leadership change straight ahead. stay with us on "squawk on the street."

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♪ pepsico is pledging to slash calorie count in its beverages as part of a new sustainability agenda. the company says at least two-thirds of its beverages will contain 100 calories or less by 2025. it's an aggressive target. i sat down with the chairman and ceo of pepsico, indra nooyi in an exclusive interview to talk about some of these goals. have a listen. >> first, we want to reduce the amount of sugar in our portfolio, reduce the amount of salt and saturated fat in our portfolio, overall. we've already removed transfats, so that was already behind us. >> the word healthy can be sort of squishy. and i'm not sure the consumers

really have a sense of what is healthy. if you look at -- you know this, the fastest growing carbonated beverage, it's energy drinks, which are certainly not healthy. >> so that is the biggest dilemma we all face because any research through the consumer they'll tell you they're eating healthier, they want to eat healthier, but the definition of healthy is a big question mark. something loaded with fat and sugar but is non-gmo natural, healthy, to some consumers, yes, okay. so there isn't a true north that explains exactly what healthy is. >> is naked juice healthy, for instance? i'm thinking about some of the marketing problems and the legal questions that the word healthy -- >> naked juice is incredibly healthy. look at the naked juice package. it tells you exactly what's in the bottle. it tells you exactly how many fruits, how many leaves of kale, how many, you know, vegetables it has. it's as authentic and healthy as

it comes. now, if you want to eat a fruit by itself, that combination of fruits by itself, be my guest. but you're not going to carry around all those fruits in your bag and consume it in those quantities. we just make it more convenient for you. naked juice is as healthy as authentic and is true to its mission as it's ever been. >> which is why you're going to fight this lawsuit. >> i don't even understand this lawsuit, so that's a whole different question. >> you have some performance goals here when it comes to people and adding diversity, something you've always been saying for a long time. do you feel that this is sort of an especially significant task for you as one of the most powerful female ceos in this country? >> i think it's a business imperative. whether you're a male ceo or a female ceo, it is a business imperative. because if you look at graduating seniors from colleges, more than 50% are women. more than 50% are women. and if you look at the best

grades, they're being gotten by women. so if you really want companies to be successful, we've got to draw from that entire pool, not try to say, hey, we're going to exclude a portion of the population. >> why are we so behind on this? >> i don't know. i think it's because we don't have the right policies to support women after they come into the workforce. >> it's certainly one of the issues being talked about on the campaign trail right now. i'm curious which one of all of them is most important to you in looking at this election in little over three weeks. >> i think we have to think about growing the economy in a significant way. again, i think we've got to grow the economy with an eye towards the world because global companies like ours operate in 180 countries. we want to make sure that any economic program does not make us -- in other countries because people go, hey, you're putting up barriers in your country so we're not going to let you in ours. >> globally you're coming off a

quarter where the macro environment looked good. i know you said on the call cautiously optimistic. it does seem like your world view economically was more positive than others. i'm wondering what you're seeing that others may not be right now. >> you know, i think we're executing so much better than, you know, we've ever done before. our innovation's working. everything we're doing in every country seems to be working. economically there are hot spots, as i mentioned. brazil, argentina definitely hot spots. if you look at the middle east, many parts there's still crisis. europe is tepid recovery, but it's not negative. brexit is still a big question mark. asia's still doing well. so i look at our portfolio and our footprint, net-net together it's work iing.

>> russia is actually doing well. >> russia is doing well right now. what we can do is we can control what we can. and that's what we're maniacally focused on. >> the stock gets grouped together with consumer staples. >> you know what, in the long term the stock will come back. again, we're going to deliver the numbers. we're going to deliver great top line and bottom line performance. it's got to be balanced. i think hitting the pedal on one or the other is not a very good thing. our performance is balanced. good top line growth, good bottom line performance. we're just going to keep focusing on that. we cannot control the markets. we can perform. we can tell our story. the rest of it is whatever happens to overall. >> your story's been somewhat unique within the industry. there's been a lot of consolidation, m&a, that has completely reshaped the industry. do you expect to see more of that? >> in the food and beverage industry? >> sure. >> probably. because if you look at the food and beverage industry there are three groups of companies. there's large cap, medium cap

and small cap companies. i think the medium cap companies sitting in sort of no-man's land because as retailers consolidate, the large cap companies can actually provide heft and, you know, growth for the retailers. >> that was indra nooyi, ceo and chairman of pepsico. we talked a lot about some of the goals that they're laying out today, guys, and just to recap those because it is sort of an investor reset in terms of expectations on where they want to be. on products they're hoping to cut calories on beverages, salt and saturated fats on some of the foods in free tito-lay, shes water trickles to the bottom line and renewable energy as well and people promote more diversity, so clearly pepsi's feeling good. she's feeling good coming off of a strong quarter with 4.2% organic growth and taking the opportunity to remind investors where they're going to go in the next ten years. she's been there almost ten years at the company. >> wow.

>> as the ceo. >> you think back it's been awhile since you had anyone else. i'm reading that at some point their target is to have two-thirds of their beverage volume have less than 100 calories. >> correct. >> so with non-diet sodas would be in the minority of their product line. >> absolutely. they've been working hard to diversify away from all carbonated beverages. beverage digest said they're about 40% right now. that's going to take a lot of innovation. she did say they're excited about some of the beverage innovation units. it's been a holy grail for beverage makers to find a sweetener outside of sugar that's natural and that's better for you. stevia didn't really cut it. that was the big hope, but it left an aftertaste. and some things they're working in the labs you're going to see consumers can't tell the difference and roll out new products under current brands on that. >> fascinating.

you got a lot out of nooyi. >> we got more. we'll have more sound later. nice. when we come back, big changes ahead at cat. the company's chairman and ceo will retire. we've got details on that. as we go to break, look at shares of cat which remain the top dow stock for 2016. more "squawk on the street" after a break. what powers the digital world. communication. that's why a cutting edge university counts on centurylink to keep their global campus connected. and why a pro football team chose us to deliver fiber-enabled broadband to more than 65,000 fans. and why a leading car brand counts on us to keep their dealer network streamlined and nimble. businesses count on communication, and communication counts on centurylink.

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caterpillar chairman and ceo doug oberhelman announcing he will retire in march. we're joined this morning by senior research analyst at longbow. eli, good to have you back. >> thank you very much. >> any idea why this didn't happen earlier or why it's happening now? >> well, it's more happening now because doug has two years more, he's 63 years old and usually they retire at 65. and it's been pretty clear that caterpillar's tough business conditions aren't going to disappear in '16 or probably '16. so makes sense to hatransition r the new ceo to have things hands on when things hopefully improve in 2018. >> you've covered these guys for a very long time. you know umpleby, was he

telegraphed of the heir? >> no, they did not. but the energy and transportation sector is the most profitable, most stable and crown jewel today of the operation. so it's not a great surprise that the guy who runs that business and made it so profitable gets a chance to run the rest of the company. >> we had a discussion this morning about this journal piece on page one which is very harsh. almost some argued it kind of felt like piling on. so many of these issues we already know about it. what did you make of it? does it illustrate any lessons learned about say the use of cap x in future regimes? >> well, it teaches you if you make a mistake in your assumptions you can get clobbered. and what happened caterpillar's 2012 mining commodities were hot and caterpillar in 2012 was a $60 billion company thinking how to go to $100 billion but the world radically changed with collapse in china and coal being a hated fuel, those combined

made the decision to double down in the mining sector a very difficult one to unwind. and with caterpillar to their credit is doing say let's change the outlook of the company, downsize to the new norm for that business and that's what they're in the process of doing. but it doesn't happen one year. it takes four to five years to do it. and you're seeing the results saying it will be 2018 before it changes. >> so overall if we look back, eli, at this inflection point, and we've asked this before but i think it's worth asking today, some of the problems that caterpillar's faced, the declining sales, has it been issues they they can control? the commodity collapse, the china slowdown, what's going on around the world, the strong dollar and how much of it is actually management decisions and mistakes? >> well, people debate that forever, but the bulk of it was beyond their control. the big one was the world and particularly the united states turning away from coal as a main fuel source for electricity. that is an enormous change.

most of the coal companies in this country have gone bankrupt now trying to restructure. this will be the first year that natural gas exceeds coal in the use in production of electricity. so that's just an enormous change. when you double down on a sector that goes out of favor, it is extremely painful. you pay up for a company when things are hot, you can get burned badly. that's what happened to caterpillar. >> have you ever -- i'm not sure this is an extremely useful question, but have you ever done any work on what it might have looked like if they hadn't made that bet? >> it's hard to do any work because it's embedded in the financial structure and embedded in the earnings and income statement of the company and its balance sheet. the caterpillar would be much more profitable because the mining business which used to be $20 billion in double digit margins is losing a couple hundred million dollar business, so by definition that itself would dramatically improve the

profitability of the company just because mining wouldn't be losing as much money as it is today. >> right. >> so it'd be far more profitable, but you have to resize the company to get rid of the mistake, that's what's going on. >> what's your rating now? >> we're neutral on the stock. we think caterpillar's a great company to own over the next five years, but it's going to be very volatile. and they signal things will stay tough. they've accelerated their restructuring far above everything that they've talked about including now cutting our engineers and r & d and product lines. so it's going to stay tough for a couple of at least another 12 to 18 months at the company. >> always good to get your temperature on it, eli. thanks so much. >> my pleasure. >> over at longbow. coming up on the show, your money, your vote. with just 22 days until the election day, we've got the latest from the campaign trail straight ahead. take a look at where stocks are trading. we've turned around and are now positive with the dow up 7.5. s&p 500 up almost one point, nasdaq up 3.5. this after two down weeks for stocks. we'll see if the gains continue.

much more ahead on "squawk on the street." stay with us.

i'm courtney reagan, and here's your cnbc news update at this hour. iraq and kurdish forces backed by u.s. air strikes have stepped up their attack on isis in the northern iraqi city of mosul. the iraqi prime minister announced operations on state television warning people to stay in their homes. it is hoped the liberation mosul will be a big blow to the islamic state. wikileaks claims founder julian assange leak to the interwas interrupted by state party. so-called appropriate contingency plans have been activated. following wikileaks publishing of thousands of e-mails apparently hacked from hillary clinton's campaign manager john podesta. assange has been holed up in the

ecuador embassy since 2012 to avoid sex allegations in sweden. vladimir putin is warning intelligence in his country that american intelligence may be watching them. putin said the u.s. listens and looks at everything and insisted russia does not intend to influence the u.s. presidential election. the nation's high school graduation rate reached a new milestone. the white house announced this morning that the graduation rate hit 83.2% in the 2014-2015 academic year. that's up nearly a percentage point from the previous year, also a new high since the 2010-2011 school year. that's your cnbc news update for this hour. back over to you, carl. kourtney, thank you very much. countdown is on. 22 days left until the election. john harwood joins us this morning with the latest. >> carl, we've got a new nbc news/"the wall street journal" poll came out yesterday morning. let's take a look at the results. it shows hillary clinton with 48%, donald trump 37%, gary johnson 7%, jill stein 2%. an 11-poind lead for hillary

clinton. that is very substantial in presidential politics. but not all polls show the same thing. so let's take a look at some other polls also out within the last 24 hours. you see the "the washington post"/abc news poll showed a four-point margin in favor of clinton. the george washington university battleground poll showed an eight-point margin. so there's significant variation in what these bottom line margins are. interestingly they all have clinton at either 47 or 48 in a four-way race. but the variation is on donald trump's number and also the number of undecided and third party voters. now, this is why most political strategists tend to prefer looking at polling averages to try to smooth out the variation between polling. but even the averages vary, so let's take a look. the "new york times" average of polling they show a margin for hillary clinton of five percentage points over donald trump. if you look at the real clear politics average, that's one that gets a lot of interest and a lot of attention, six pf-point

average. look at the "the huffington post," shows a larger margin, eight points. let's take a look at variations in polling. first of all, the most important predictor of how somebody's going to vote is what party they identify with. and so getting the partisan balance is tricky because those attitudes change. you might say in one year you are an independent and another year you identify with one party or the other, so that's one key. in our poll the nbc/"the wall street journal" poll had a democratic advantage up 11 points among likely voters. that's what drove our margin up high. in addition to that you look at the issue of response rates, fewer people are answering their telephone polls. we still believe the most reliable form of polling is live interview telephone polls, but many people don't answer their phones. and so having the persistence to get a random sample is expensive and difficult. and finally, the issue is trying to model turnout.

nobody really has a perfect system for figuring out who's going to vote. one of the things that we've traditionally relied on is the level of interest that a voter expresses in the campaign, the level of enthusiasm for their candidate. but what mitt romney's pollster found in 2012 as he's told me and others is that a non-enthusiastic vote counts just as much as an enthusiastic one. so everyone's revisiting their methods of figuring out when they do a sample of 1,000 people which of those thousand people are likeliest to vote. it's an inexact science. there's some art as well as science. and this is why we have varying polls, carl. >> john, thank you very much for that. our john harwood and whether it's trumped rigged election rhetoric or clinton's continued wikileaks headaches, wednesday night's debate is going to be crucial for both campaigns. let's bring in veteran political strategist former dnc advisor steve mcmahon, and former cruz campaign spokesman rick tyler.

rick, again this morning trump 8:30 a.m., of course there's large scale voter fraud happening on and before election day. how does one even begin to refute that? >> well, you can look at the studies. you really have to focus on a single district or area or city in one's particular swing state because, you know, polling -- or elections are conducted by election officials on a local level, so there's thousands of them. so you'd have to have a conspiracy on a mass scale if he was going to lose all the states that he's losing now. but look, it doesn't really help his message. if you say that the election is not legitimate, how is that supposed to encourage your supporters to go out for you? i mean, why would donald trump supporters participate in a rigged election? moreover, donald trump won the republican nomination presumably by the same rigged election. and the last thing is you need to know is winners don't try to undermine the outcome of

elections. >> steve, i assume it's meant to maximize the base's output by trying to make up for the deficiencies they're facing in fraud, right? along with minimizing any turnout from swings. >> that's only because you're a rational human being, carl. what's been going on here for some time is that donald trump has been losing the election. and now he appears to be losing his mind. he's imagining conspiracies that don't exist, the entire world is now apparently out to get him in addition to the democratic party, the republican party and the mainstream media. and what i really think is going on here, frankly, is he's trying to divide the republican party because he sees an audience for his message of hate and bigotry that might actually find its way onto a cable channel at some point. perhaps a breitbart owned or trump cable channel. that was a leak that actually came out this morning in a playbook that jared kushner, his

son-in-law is in talks about forming a trump network or breitbart network that will take his base to a cable channel. remember roger ailes left fox news so he's floating around in the trump universe. i think what's going on is he's no longer trying to win the election. he's trying to divide the party and create an audience for what comes next, which is going to be an angry vitrealic trump-branded network. watch. >> rick, a lot of people have been speculating about that. and it was interesting to see that report this morning. where does that leave the republican party after donald trump, their chances and whether they can even stay together? >> well, i think steve's absolutely right. i think they are looking at post-election, i think they realize they're not going to win this. donald trump will go into this try to defend his reputation. he'll actually do worse damage in his third debate than he's already done. but everything points toward what the leak points to which is a third party network. i also think that, look, the republican party right now is

splitting as we speak. after the election it will essentially be three factions. it will be the establishment faction, which is well funded, has lots of leaders, it's the faction everybody's mad at, which is why we ended up with donald trump. you'll have the breitbart wing which is the wing surrounding donald trump, which i think will try to be a force after the election. they have very media savvy people around them, they'll have money and organization. and finally you have what i'd like to think is an intellectual conservatism which currently has no leader and no message and no organization. so we're just going to have a brawl. >> steve, let's talk a bit about the senate and congress. i mean, there seems to be some hope amongst democrats that, well, even that congress could be in play. that seems unlikely. i'm just curious to get your take though in terms of the senate what your expectations may be. and if there really will be an impact down the ballot if people don't show up in sufficient numbers to vote for mr. trump. >> well, i mean, there has to be an impact down the ballot if people don't show up.

donald trump is lighting his political party on fire. and if you're an establishment republican, if you're a principled conservative as rick is, you don't really have any reason to go out and vote for donald trump. and it can't -- it can't help but having an impact -- or have an impact on senate races which i think you're seeing people who shouldn't be really in danger because for red states people like richard burr for instance who are having very difficult time in missouri, senator blunt's having a tough time. those are races republicans should be able to count on, and they're in jeopardy. and then you see all the states that were in play are still in play, and now a number of new house seats every week are coming into play. i think the republicans have to be nervous about their majority, not just in the senate but in the house. >> finally, rick, as far as the clinton campaign goes, do you try to expand the map to arizona and georgia and iowa? or do you try to solidify those states you think you really will win? >> well, from everything i read they are looking alt those areas

and trying to do away -- i don't know if they're spending resources there but doing a lot of smartly local television in georgia and arizona chl i think mccain was on arizona from new york yesterday. i meant kaine. we started with somewhere around five or six states expanded now to 13 and she's winning in places like arizona, like she's closer in indiana than she should be. she's closer in georgia than she should be. she's even closer in texas way more than she should be. so she's got a great advantage. i mean, if you look at the electoral map, donald trump would have to really run the table. he'd have to win -- he's going to have to win florida. he's going to have to win ohio. he's going to have to win ohio, if he loses any one of those in the first hour on election night, then the race is over. >> more than a million people it's estimated have already voted too. we haven't really talked about that. steve, rick, thanks so much, guys. appreciate it. steve mcmahon, rick tyler. up next, outlook for the

economy and of course his take on the election. and check out shares of toy maker hasbro surging up 7.5% after beating estimates on the top and bottom lines. largely on the strength of its disney themed toys. much more ahead on "squawk on the street." stay with us. guess what guys, i switched to sprint. sprint? i'm hearing good things about the network. all the networks are great now. we're talking within a 1% difference in reliability of each other. and, sprint saves you 50% on most current national carrier rates. save money on your phone bill, invest it in your small business. wouldn't you love more customers? i would definitely love some new customers. sprint will help you add customers and cut your costs. switch your business to sprint and save 50% on most current verizon, at&t and t-mobile rates.

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see your lexus dealer. welcome back to "squawk on the street." markets are trying to get back to positive. they've slipped just now to negative territory, but energy is sticking to the downside. one of the worst performers so far as you can see there in the s&p 500 this is crude oil falls by about 1% on wti to $49 a barrel. weighing on the sector overall you got exploration and production names, the likes of which chesapeake energy, southwestern energy, cabot oil and gas, devon energy all down by about 1% to 2% so far. certainly, david, a sector to watch in early trade. thank you, dom. let's go over to rick santelli

now in chicago of course at the cme. he has the santelli exchange. >> good morning, david. i'd like to welcome my first guest of the week. doug holtz-eekin thaungs for joining us. >> thank you, rick. >> let's go back to another machine and another life, you're director of cbo, congressional budget office, this organization is always in the news lately because if you want to look up either candidate and how their various proposals seem positive on infrastructure at a time we're trying to slice the dollar into about 200 cents, there's not a lot of money. but the cbo rates various programs and what it will cost and what they won't cost. if they're so good, doug, what happened to the future on the affordable care act/obamacare or when they looked at things like dodd/frank. seems to me garbage in, garbage out. do you agree or disagree? >> i'm going to agree and disagree. first, let me defend the integrity of the organization

which really doesn't have any intent to bias one way or another. i believe that. >> but they can't make up the numbers. i get that. i think they're moral too. i want to talk about results. not the morality. >> second thing, the cbo is actually at its worst when it is most important. weirdly enough. because if you invent something out of whole cloth, like the aca or the part d drug program where they don't have a lot of experience, it's harder to make the estimates. there's no historical guide. keep that in mind. and then third, i think it's really important to recognize that while everyone is out there talking about how fabulous infrastructure is, cbo just put out a report on federal spending on investment and how little the payoff really is. so they're warning everybody don't expect too much. and then the last and most important piece, rick, the target keeps moving. when the cbo scores a bill, say the affordable care act, they're assuming that the administration will implement it as it's written. look what happened with the aca? are we going to have the mandate or not? we'll put it off for a couple years. are we going to have people hold onto their policies or not?

yeah, they can hold onto them. they've changed implementation a million times. not fair to blame the cbo for the law they scored -- >> let me stop you there. doug, you're a smart person, i think everyone watching understanding the dynamic, they want good results but what they put in and put out has a lot of moving parts and assumptions. >> yes. >> what i want to drill down, both of these candidates like infrastructure, neither of these candidates want to go after entitlements which surely at one point will reach $1 trillion. we have to actually spend on pet projects, it's that thin, paper thin, i don't know where they're going to get this money but taxes are going to be a big deal. and it's rating how these taxes will ultimately effect gdp. that's where my beef is with them. and you seem to agree, they need a big boilerplate. we don't know if this could be true, we have no idea how much they'll get through, whether congress will vote on it, what they're going to do with taxes, but we've had many guests say, oh, my god, this report, sandy's report 1,000% facts, i disagree.

>> look, the cbo gets used and abused by politicians all the time, right? so they take their reports, put them out of context. in the end it is fair to criticize the cbo for a score on a bill that it score on a bill that it actually got. it's not fair to criticize them for what other people say about proposals that are not yet actually built, because it matters what's written down. i think that's not fair when people blame the c bo for our interpretation. >> no, i'm not blaming the cbo. if the cbo is a private organization that had stocks on the new york stock exchange and some of the things they put out would require boilerplates on the bottom that would take up 100 pages, okay? that's what i have a problem with, and my final notion is this, you can keep your -- the affordable care act is melting down. i don't know which side of the political spectrum you're on, but why is so little pressed and so little of the candidates' speeches focused in on 1/6 of the economy burning up like a

hay stack in summer? >> look, i don't know. i think, you know, from the substance of it, the aca's a disaster at the moment. the dodd/frank bill does not get enough discussion. this is 400 rules, some of which are horrifically bad, conflict minerals, vocal rule. >> it might get worse. you know what the rumor out there is in there's a rumor whoever wins presidency could appoint somebody to the supreme court that might be already sitting on pennsylvania avenue. i don't know if it's urban legend or not, but when you think about what's going on with all these programs like the consumer financial protection, what happened in the u.s. court of appeals, that's also kind of an interesting prospect to think about, i thank you for taking the time, doug. david faber, back to you. >> okay, thank you, rick. rick santelli. coming up, scott wapner is celebrating the anniversary of the half-time report. today he speaks with carl icahn and jeffrey gunlap.

all right. later this week, a lot more, all starts today on half-time noon eastern. more "squawk on the street" coming up. this car is traveling over 200 miles per hour. 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.

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the big colts/texass game last night. the rating, down 38% from last year. pepsico is one of the biggest sponsors for the nfl, so with the recent decline in football viewership and traditional tv overall, i asked the ceo if she was worried going into the next big pepsi super bowl half-time show. listen. >> i don't know, let's wait until the election season is over, sarah, because i think right now it's so much sensationalism in the election season, so much breaking news every hour, so i think the football viewers are drawn to that. it's still one of the greatest sports and so much fun to watch and i think football is as apple pie as anything to the united states, so let's just wait. >> as apple pie is to the united

states. so is football. >> this is not an unimportant subject, certainly, for a lot of media companies that spend an enormous money on the rights to broadcast those games, so we will keep an eye on it, it's important for pepsi. >> is that what you're hearing, election, breaking news? >> that's what they are saying. i don't know. cord cutting has not taken to the place 38% fewer viewers are out there to the ratings you just cited, but there's something going on. what it is, isn't exactly clear. >> lady gaga will be the half-time show, which i predict will be more exciting than coldplay last year, so we'll see. >> i don't know about that. >> just a prediction. >> great prediction, thank you for that. >> you're welcome. >> that does it for us on "squawk on the street." "squawk alley" is coming up next. they'll sit down with thriller ceo ben lerer. not going to want to miss that. stay with us. what powers the digital world? communication.

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♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ good morning, it's 8:00 a.m. at apple headquarters, 11:00 a.m. on wall street, and "squawk alley" is live.

welcome to "squawk alley" for a monday morning, i'm carl quintanilla. john ford has the morning off. joining us this morning, good morning to you. >> hey, how are you? >> good. 22 days until the election. new york times reports peter thiel is donating to donald trump's campaign. while it may be a significant number, reportedly pales in connection to silicon valley's support for hillary clinton. it's interesting even as some are painting a