friendlier time toward tech in general after the election. depends where this rotation sort of ends up. >> now we wait to see if we can hit dow 20 k. we are about 90 points away, up 115 points today. on that note, we'll send it over the kayla for the 11:00 a.m. hour. kayla? >> thank you, guys. i will point out sarah is wearing heels in that shot too. good morning, everybody. it is 8:00 a.m. at yahoo! headquarters in sunnyvale, california, 11:00 a.m. on wall street, and "squawk alley" is live. ♪

good morning and welcome to "squawk alley." with me at post 9, jon fortt and brian sullivan. welcome. ? thanks. >> great to have you. joining us as well, henry blodget. good morning to you as welp. >> great to be here. >> our top story of course is january net yellin and the fed unanimously approving the first rate hike of the year, the second in the last year. this is the major averages cut early losses and continue to close in on dow 20,000. henry, not eve an rate hike can stall this rally, but the question is whether we're just borrowing from 2015 gains that the point. >> that is the question. i certainly hope things continue to go up. it's changing the mood, suddenly people are optimistic again, it's wonderful, but stepping back, the fed is raising rates. that is generally not good long term for stock prices. and as we've talked about a lot over the last few years, stocks are very expensive on a historical basis. the defense for that is rates are super low. now rates are going up.

so the combination long term, actually, doesn't awe fwur well for the stock market. >> you know, true, you and i are so old hands at this, but i will say this, in '94 we saw five or six rate hikes. 1995, the dow was up 33%. we've seen rate hike cycles in the mid'80s where stocks didn't clams. so i don't know -- does it have to be bad or could it just be not good? because they're different things. >> absolutely. >> nothing has to be bad. the future can always be different from the past, but in the past in most cases over time during tightening cycles you get stock weakness. so let's hope it's different. the good scenario would be we have reached full employment on the numbers, if we can start 'toine crease wages now, so folks have more money to spend and we start to grow the economy faster, and earnings continue to grow, then that is a great scenario and stocks would do well. >> that's the point. executives have been saying for years that the time when the fed will raise interest rates is a time when the economy will be

growing in a way that both yields and stocks can rise at the same time, because a rising tide will lift all boats. >> absolutely. that would be a wonderful scenario. hope it happens. there's a lot of optimism. there's a good boom. you look at what trump did at the summit for the tech leaders yesterday. it was an incredible relief to hear him treat those companies and the people in the room as well as he did and say, look, basically, america should hold you up and celebrate you and your companies. it's great for the economy. that's a very different message than when he was campaigning and very positive. >> we also have to remember, this time is -- and i usually hate the term this time it's different, but this time it is different different because in the previous rate hike cycles we would go from about 3 on the fed funds to maybe 4. we're going from one-half of 1% to maybe -- we're still massily low historically. so i wonder if it is analogous to these previous times. >> and that's just taking all the historical perspective into account and just thinking about what academically makes sense.

but, you know, give than we just had this election was about a certain portion of the economy being left behind, given the fact that the stock market has been relatively speaking roaring, you know, knocking on the door of 20 k and that rates are on their way up, i mean, you have to wonder, do we stagnate, is there some shock next year that then sends things going in a bad direction? you never know. >> we're going to talk more about the markets later on. we'll talk about that tech meeting too, but we should mention that shares of yahoo! are sinking on some reports that verizon could be poised to scrap the $4.8 billion takeover deal. of course this comes after more headaches for yahoo!, it disclosed a data breach back in august 2013, where 1 billion accounts were breached, more than twice as large as the previously disclosed hack which at that time 500 million accounts back in 2014, the biggest hack of the time, until this new one. even that was thought to be

material enough to let verizon reconsider this deal. so what do you make of this one? sfwheel, it's another 2 x 4 in the head to yahoo!, certainly not welcome. i think verizon is probably taking a position, hey, we'll use if thr negotiation. signals we've been getting is it is rough. it's not clear it's going through. if you're a yahoo! shareholder you can come back to the fact the vast majority of market capitalization of yahoo! right now is other things so even if the deal were to fall apart, probably wouldn't be devastating for stock price. >> at this point you have to assume they got everything. everybody's accounts were breached probably including yahoo! executives, every government employee that had a yahoo! account. you never know exactly what kind of vectors emerge from this kind of account. for mom and pop and brother and sister, everybody at home, i think one of the take-aways is it wasn't just the pass words that were taken. it's the pass word security questions so if you are not using a pass word locker application, if you don't have

complex pass words that are different for absolutely everything, even if you do have some different pass words but you're relying on pass word questions that are actually true biographical information, time to make some changes. lie in your pass word question. >> joh jon, can you go into thet of how this happens? if i want to learn kayla's pass words you guess based on what you know, go after one person. does this indicate that somebody may have something inside yahoo!'s servers, their data farm somewhere, one of these automated sort of deep worms that's collecting all this data and maybe that's what verizon fears? do they want to purchase this physical software and have that stuff on their servers? >> well, brian, these days there are a couple of ways that massive hacks mostly tend to happen. it could have been somebody with a thumb drive that got into actual, you know, yahoo!'s -- you know, slipped somebody a thumb drive and they got access to the system. most often it's just a phishing attack.

you get access to the right couple people who click on a link internally -- >> could you do that far billion people, though. >> absolutely you could depending on how the system is architected and how good the hackers are. >> and yahoo! started in the mid-1990s, you don't know how up to date the protection systems are, but this is one instance. we have it in the election, everywhere, going forward, just security for corporations and the folks you trust with your data is just going to be more and more important. >> customers were willing to forgive jpmorgan, target, t.j. ma maxx, joanne fabrics, anthem health. but this is a tech company. shouldn't they have been able to thwart this? >> yes, they should have. and brian made the point earlier, a billion -- i didn't realize they had a billion accounts. so clearly this is going back a long time. this is probably everybody who has ever had an account at yahoo! so a lot of these folks don't have to forgive the company because they're not using it now anyway. >> to further kayla's point, the forgiveness of the act or is it the forgiveness or punishment

for not revealing that this was three years ago? >> i assume in this case, to give yahoo! credit, they actually didn't know about it. >> the report said they were informed by authorities but they arguably should have been the ones who were uncovering it themselves. >> yes, and the doors should have been locked. now they know. >> it's possible ma malware has been sitting on yahoo!'s servers sitting on its system for literally years. ? that's what i was getting to with my earlier question, which is a better way to stay it. >> you could get in that way through a phishing attack but if you're patient and sit in there for years and wait to call back to your servers and start ekts tracting information, it's possible you can get a lot more than trying to take it all at once. a property like yahoo! that does have hundreds of millions, up to a billion accounts and lots of different personal information, there's just ton you can harvest. >> maybe there's analogy here that, you know, sort of a nontechie can understand, which i think would be if you go to buy a house and you realize maybe there's a little bit of

mold, you know, you can negotiate with the seller and say let's remediate the mold, you need to give me a discount, whatever -- >> or it won't pass the inspection. >> or it won't pass the inspection, or you realize the problem is a lot deeper than you thought and you scrap the deal. is tim armstrong of aol, now verizon, is he using this, to your earlier point, as a negotiating tactic or are they seriously saying is this a compromised company. >> i mean, there are certainly dangers here lurking that you can only imagine. first of all, just the legal danger, if companies, if individuals end up suing you because they can show that some negligence on yahoo!'s part ended up causing real monetary harm to them. you sort of step into that as verizon buying this, not knowing what might come up a year, two, three from now. >> i'll ask brian this because you're a lawyer -- >> i have a law degree. do not practice. which makes me extremely dangerous. >> put on that hat for a second because you had 150,000 reportedly government employees, everyone from white house

officials to intelligence officials. could this become a federal inquiry? could there be any sort of federal charges that could belie yahoo? >> i think there has to be wrongdoing for there to be any kind of a charge so, was it just negligence? i think people would be interested -- now, whether you could go forward with the actual investigation, kayla, if it's just negligence, that's tough. you know, you call people before congress, what happened here, how could you do this, but if somebody actively did not reveal it and they knew it, that's when you get trouble. >> brian sullivan, esquire. >> i've read esquire. it's a good magazine. >> e-mail, 2016. my goodness. >> come on. >> so passe. seeing shares down 5%. would you buy the dip? >> i've owned yahoo since the 1990s. i'm not a trader so i'll leave that to the traders, but the good news for yahoo shareholders is most of the value is in alibaba, yahoo japan and other assets, not in the $5 billion deal.

>> henry, have a good weekend. >> thank you so much. >> let's take a quick look at the markets. the dow is now within 60 points of 20,000. we'll keep an eye on that for you. when we come back, why rising rates may not be enough to stall the trump rally to dow 20,000. and then facebook is updating its messenger app with snapchat in focus. and later, more fallout from yahoo and its latest data breach, what the company is doing to prevent future leaks and sthaich teal with verizon. more with "squawk alley" coming up.

we remain on dow 20,000 watch. we're going on four days now. the index within 34 points of that 20,000 mark yesterday before reversing on the suddenly more hawkish fed. guess what, we're up 155 right now, at 19,947, so we are back within 52 1/2 points of dow 20,000. joining us now, janice -- martin h , let's start with you, yesterday it was all about the federal reserve and inflation suddenly became a relevant topic again. for our viewers that don't remember the last time we had a serious inflationary scare because it was about a decade ago, how does one invest in a rising rate and rising inflation environment? >> that's a really good question, and i think for fixed

income investors, inflation linked bonds is a topic of special interest. what we advocate doing is swapping all nominal duration exposure that one would have in their diversified portfolio and putting into some form of bonds that have an indeck sags that moves in line with ip inflation, and that's where toots can come into play. >> okay, so that sounded complex and hard. do we buy tips, which are treasury inflation protected securities? buy those willy-nilly and that should be a good investment for the next couple year? >> not necessarily. i think as part of everyone's diversified portfolio, there will be some fixed-income holdings in there. what we advocate doing is moving out of those nominal fixed income holdings and purchasing inflation linked mutual funds or etfs that may be a substitute for the nominal duration exposure that they may have had previously. and what this will give these

individuals is protection from a deterioration and purchasing power with an uptick in nominal inflation. >> george, you said that the fears are overdone, that the fed is looking to hike three times at a point where we really don't know what's going to happen in the beginning of a trump administration and a republican congress taking over. what do you think people should be taking away from the fed's -- not just the action yesterday but the signaling toward three hikes? >> i think what they're doing is signalling that one, we're having an emergency growth that is sustaining, they're being data reactive and i think that's helpful. the second thing they're doing is indicatings inflangs inflation is back. the disinflationary trends we've experienced as an economy for the past several years are not only abate bug reversing and we're seeing signs of inflation whether that's wage cost inflation or commodity inflation, et cetera.

so they're being reactive to a healthier nominal growth and environment and i think that's constructive certainly for a vast slot of equities, both domestically and internationally. >> martin, what is the new makeup of the fed in 2017, which we'll see two to four new fed voting members? does that change the outlook materially or is yesterday what we should think about for the next year to come? i think what we got yesterday is probably what we should think about for the year to come. there are still unknowns with the president-elect's new policy, and i think what the broad committee was doing yesterday is actually just removing some of the negative term premium that's been embedded in the interest rate curve. so i do think it will be potential of three hikes next year, at least for the time being given the information that we have in hand. >> you know, george, for the last couple years, yesterday, by the way, i called the fed the l.a. rams of the finance world. they exist, there's changes coming, but they're not relevant. for the last few years we have

seen the fed hold the entire card. it's really all we had. now the economy seems to be taking off. housing is hot. stock market is doing well. where is the fed's role going to -- you're welcome -- where is the fed's role going to be in trading going forward? sit number one or out of the top five? >> i think you're right. i think the fed's role in terms of being the controller and manipulator of markets so to speak is stepped back. i think right now you're actually seeing a return to a growth mode, whether you're seeing animal spirits among corporates, a return to spending and consumer confidence among the household sector. i think you're seeing true economic activity beginning to take hold and that is a clearly healthy thing. >> it is healthy because it's all we've talked about and had to talk about for a number of years, you know, are corporate earnings going to matter again, is real growth -- i don't mean stock buy babs, all these sort

of balance sheet tricks that companies have been doing. do you expect us to return to an environment where corporations can grow both the bottom and top lines and we're going to buy companies because they're fundamentally growing earnings again and, wow, doesn't sound -- doesn't that sound a little like warren buffett? >> i think that's absolutely right. and that's my expectation. i do think you're going to have an environment where you're going to have companies being able to grow again. they're going to seek better investment opportunities so you'll see an increased amount of cap chall expenditure and capital investment, increase interest in hiring. all the buybacks and increases in dividends will probably be tempered as these new investment opportunities arise as people now think there's growth in the economy as a function of better inflation and better real growth. >> martin, tell me how much trump administration perfection do you think is priced into the market right now? it promises to kill regulation sort of fix the tax code, take full advantage of the gop dominance in government come

january. >> that's a very good question and a tough one to answer. but i'm of the opinion that some of the dynamics driving the fed and other global central banks were already changing in the run-up to to the election where we had the bank of japan earlier in the year basically step back from their negative rate dynamic that they had been focusing on, pegging ten-year nominal interest rates at zero and allowing the back end of the jgb curve to steepen. we saw the ecb do that by basically increasing the scope of purchases to include bonds below the deposit rate thereby putting pressure on the long end of interest rate curves globally. and i think central banks are beginning to question the efficacy of the policy that they had in place before which focused upon putting interest rates at negative levels, depressing or even creating an environment of negative term premium of the curve, and that

was already changing in the run-up to the election. >> and, martin, i'm going to jump in on what you're saying because i think it's very important. it's a little wonky but very important. let's dive in deeper because it does impact stock prices here. overnight we saw some bond problems in china, some stopping of trading of certain bonds. in japan, their government bonds, the jgbs you referenced, have been absolutely hit. we're seeing movement in the german bund and a 40% backup on the yields in the ten-year treasury in the united states in the last 90 days. the trillion-dollar bond market is now shifting in away we have not seen in more than a decade. how is that going to impact the equity markets? what does black rock see this massive shift doing to more standardized investments? >> well, i think one, we have to look at what that means for the impact on growth, and, you know, rick rueter was on "squawk box" this morning talking about some of the changes that we think are taking place potentially from

the tax side that could do a lot more than just offset the cost to corporates and individuals from the increase in interest rates. and what you've got to remember is when you look at the structure of corporate debt issued, the average maturity outstanding of corporate and high-yield debt in the u.s. in the early 2000s was something in the vicinity of, say, 7 to 8 1/2 years. that average maturity outstanding has now shifted to around 15 to 16 years. so corporates have done a tremendously good job of turning out their debt structure. so that definitely has implications for a short-term spike in rates having the potential to derail growth prospects. so within -- >> thank you. >> martin and george, we're going to leave it there, guys. a really good discussion as we are marching our way slowly towards dow 20,000. thank you very much. >> thank you. pleasure. >> still to come, more on the

markets as we do this climb toward dow 20,000. and before we get to the break, take a look at some of the dow's leaders, american express is up as is goldman sachs and jpmor n jpmorgan, unitedhealth, home depot, visa, apple, walt disney also up. for "squawk alley" in just a moment. ♪ there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be.

welcome back. we are keeping an eye on the major averages, right now, because this morning it looked like dow 20,000, out of reach. guess what, we're up 150 points on the dow right now, a little more than 50 points away from bob pisani, this thing called dow 20,000 which you may have heard something about in the last couple days. >> vaguely something about it. we all wish that it would happen so we can all sort of move on with our lives. i think we have a shot at it today and i'll explain why in a

minute. let me show you what we're doing with the financial stocks because the reason we're moving up is largely due to what's happening in financial names. goldman sachs, the biggest stock, remember, the dow is a price-weighted index, $250 stock helps move things around a lot. jpmorgan, american express, travelers, 52-week high. only 0-2 dow stocks at 52-week highs. that's goldman and j.p. morgan right now. but you put these four together and do the math on the dow and those four are responsible for about 60 points in the dow. so, oh, about, do the math, 45% of the reason the dow is up is due exclusively to these four stocks and that is the main thing happening here. other major factors contributed to it. oil turned around. remember, we've had crazy move in oil in the last few days. we were almost $55 on monday, we eventually moved down to $50 today, almost a 10% move the oil in the last several dais. we started down, exxonmobil, chevron, all the big oil names

started down, but as oil started turning around or at least trying to bottom, those stocks came back, so exxonmobil was positive and now it's flat. chevron up a little bit. then at the same time right at the open, weakness just turned around immediately in the tech name. so apple started moving to the upside and intel started moving to the upside. let mex plain why i think we have a shot at moving. put the dow up for week. in the last several week and a half or so, there's been a tendency for the market to rise going into and immediately after the european close. this is not obvious looking that the chart, but trust me, after about 11:30, this suggest ts there has been some selling pressure coming out of europe. we've heard some comments from europeans stockholders indicating they may not be as bullish as we are about how 2017 prospect are. this would make some sense. i say that again because it is happening in the middle of the day and being only 50 points away from the dow with the tendency to rise in the last 50 weeks or so, if that trend were

to continue, i think we have a very good shot of hitting dow 20,000 based on that. also remember storm a quadruple witching expiration where you get the expiration of stock index and stock options as well as individual stocks and futures as well. so the important thing is there is a tendency to rise slightly going into that close without getting too technical on it so for a couple reasons i think we have a very good chance of hitting dow 20,000 today or tomorrow. i want to note, strength in the financials is lifting virtually everything. the s&p is moving just the same on a percentage basis as the dow jones industrial because it's stock full of regional banks like regions, financials, or pnc or m&t or suntrust, doesn't matter, they're essentially all at 52-week highs. the s&p 500 is largely dominated by two sectors. those are techs and financials. you put those two together and it's almost 40% of the waiting

in the s&p 500, just two, and there's 11 sectors, two of those are 40% of the weighting. so when you get one sector like the financials really moving and then you throw in a little bit of a rally in the tech group, that's how you get these powerful rallies here because those are collectively the biggest market capitalization here. remember, s&p, market cap weighted, dow is price weighted, but in this instance they're both moving essentially at the same speed right now. brian, guys, back to you. >> thank you so much, bob pisani, on 20,000 march. still to come, we are keeping our eye on the markets with dow 20,000 in sight after bullish housing data earlier this morning. major averages are up across the board. check out where the ten sectors are. fairly mixed. looking at the dow today, united technology, nike, 3m, fiz esche and exxon the only components in the red.

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hi, everybody. i'm sue herera. traces of splois have been found on some of theic victims from the flight that crashed into the mediterranean sea in may. a criminal investigation will begin. no group has claimed credit for that explosion. three people were killed and 12 injured after a two-story residential building collapsed in mumbai, india. 15 people were rescued.

the cause of the collapse not yet known. nasa successfully launched eight mini weather satellites this morning. they were loaded onto a pegasus rocket that was attached to the belly of a plane. the rocket and the satellites were released 39,000 feet above the atlantic. and dogs, look at that cute face, will be receiving 2 1/2 times more gifts than cats this holiday season. that's according to sli systems, which has analyzed e-commerce website search trends across pet product sites. dog beds are the most popular gift for canines. cat toys top the list for felines. that's the news update this hour. back downtown to "squawk alley." jon, over to you. >> not fair but it's okay. thank you, sue. we are watching this rally in the market. some 60, 70 points away from dow 20,000. let's get to seema mody back at hq the close in the uk and across europe. >> and we are in positive territory across most of europe,

positive sessions there following the u.s. rate hike. the bank of england and norway, by the way, leaving their rates unchanged. a lot of movement in the bond market, though, on the back of that federate hike. the german two-year falling deeper into negative territory on the prospect of wider policy divergence in 2017 with a fed tightening and the ecb easing, the german two-year again now at negative.78%. the anticipation of more rate hikes sending the dollar higher against the euro. certain wall street banks have been calling for the euro-dollar to hit parity, currently trading at 103 against the u.s. dollar. that's the lowest level since december of 2003. now, that's putting the spotlight on europe's biggest exporters and the luxury space. you had names like louis vuitton, burberry, prada, benefiting by a weak currency to make their products look more attractive to an international consumer. autos rely heavily on consumer demand from the united states and asia. you can see shares of the big

autos in europe trading higher. sky and 21st century fox reaching that deal, rupert murdoch's 21st century fox buying a 61% stake that it does not already own, showing how murdoch is growing its presence in uk media, already owning the times newspapers, "the sun," among others. lastly, the yoeuropean leaders e gathering in brussels where defense and military ties is expected to be top of agenda. russia's assertiveness and increased presence at the border of many baltic companies will also likely be discussed and the role of nato in playing a role in supporting some of its eu allies. top of mind but perhaps not openly being discussed according to some of the analysts i speak to, will the president-elect donald trump support russia if it tries to invade some of the nations on the eastern front of europe on the prospect of a renewed relationship between the united states and russia, a topic or something we will continue to watch in 2017. brian? >> all right. seema, thank you very much. as we have noted, we are again

getting close to that dow 20,000 mark. joining us now, peter costa, empire executions. yesterday i think it was 35, 36 points we got within, hawkish fed sort of brought us back down. now we're back um. why are we suddenly not afraid of the fed like we remember just, what, 12 hours ago? i think that what happens after the fed speaks, and we saw what happened, a lot of that is computer-general rated selling. and, you know, that's not -- i don't think that's a sentiment. i think it's just there are certain programs that are just geared towards negative or positive comments from the fed, you know, like a whole underlying web of computer models that look for this stuff. and i think that's part of what happened. the volumes weren't really that big. so it wasn't a big sell-off. >> did you expect 20,000 to come sooner than later? not could. anything could happen. will we hit it today? >> i don't know about today but today or tomorrow you'll see it at some point. we have triple witch ets, expirations tomorrow, which will

lead to a lot of volume on the close today and tomorrow we'll have a lot of volume so, i think the potential for a little more volatile market which could lead us to 20,000, not saying it will close above that, you know, it's a number. we like to make a big thing, you know, a lot of people bought hats, that's a number. >> a lot of the up days that we've had since the election, since this rally really took off in earnest has been in response to tweets from the president-elect and on that it's really human buying, it's humans parsing what he mean, what he will do, what the administration will prioritize. do you think that this rally is truly human generated? >> i think it is. i think the bottom line is the investors are starting to put more money to work. rebe it retail or people investing in etfs or sending more money to mutual funds, there's a lot of money move back into equities pip think a lot of people are trying to catch that ride and they started right after the election, looked like, you know, you're looking at one thing from the election and we

all were wrong. i'll be the first one to admit it. and then the market turned it and it ket going and that's just people following each other, i don't want to miss this move, i'm underinvested in u.s. equities. there's a lot of different things going on where money is moving into the market. i think lit continue. and i think that who what you'll see -- we're going to see some sort of sell-off at some point because you look at it, we've been making new highs only almost a daily basis, but today if we close -- say we close here, this is actually a fairly substantial move, 135 points. it's not a bad move, but a lot of the moves have only been 20 and 30 points. >> a lot of the folks at home have sat this rally out. that gallup poll back in the spring said 52% of americans are invested in stocks. it was two-thirds of americans about seven year ago. is now the sucker's time to get in? we're going to get those 20,000 head likes if it happens and people will go, oh, stock market, great, president-elect trump coming in. should people be careful about getting in here? >> i think they should be.

i think there will be an opportunity to buy into the market at a much -- at beater valuation. i think the valuations are getting a little high. you do see that. generally the rule of thumb is when the retail investor gets involved, that's normally portends a top or you're near a top. and i think we've seen that. you've seen the retail investors have been getting more and more involved. if you look at what charlie schwab, td ameritrade, everybody is saying that ear getting more activity on their websites, people are getting more involved. i do think that kind of tells you you are getting towards that tail end of this part of that fall. >> i think jon's right and i'm going to say you're wrong. >> okay. >> at the beginning you said it is just a number be, and you are right, technically it is, but it's a number -- your shining face on the cover of the "usa today" and the "nightly news," the stuff that they never talk about the stock market, suddenly you guys are going to be front and center. and that brings people in. >> and that's a great point. >> your shining face?

>> that's true, but for the professionals 20,000 is just a number. as far as like the overall economy -- >> the folks jon was talking about. >> exactly. it will be something on the "nightly news" on nbc, it will be everywhere. and, yeah, that is something that might motivate people to say, oh, my god, i'm only a third invested in u.s. equities. maybe i want to start putting more money to work. exactly nap also could be a negative signal, too, because now the institutional side has already put their money to work and now it's a retail side, a lot smaller, a lot broader based, may not be enough to carry the market that much higher. >> a pleasure. >> more fun for me. >> just a love fest. >> before your 15 minutes. >> i'm going to come back with me. next time you see me i will have one. >> thank you. still to come, as the dow closes in on that 20,000 mark, we'll break down the biggest movers since dow 10,000. so long ago. first rick santelli, what are you watching today? >> well, i guess i'm watching 62 points away from y20skshgs

important today. we'll talk about that after the break. remember, there's hope, there's optimism, then there's confidence. they're not really the same. what separates them? aha! tune in after the break.

we're going to try to get scott patched in. >> we'll be on top of that even though we've backed off a little bit. we'll try and discuss what happens when we do as well as looking at some of the risk out there, brian. interest rates are obvious listen aesch listen issue. the fed moving faster than people expect could be an issue. right now people want to buy the rally as the slow streak toward 20,000 continues. >> i know some of your traders have been particularly bargain hunting some defense names, tech names that haven't necessarily been part of this rally the entire time. i'm curious whether you think that they feel we're getting a little rich here. >> you know, people keep saying that, well, the market looks expensiv expensive, the market looks expensive, butn this you look at sectors that were so out of favor for so long and people

want to buy them, whether they're the cyclicals, some of the vil names. there was a call today on the street about caterpillar, which has had an incredible run, yet one firm is putting it at overweight, thinking that it has more room to go. another firm talking about apple being their top pick of 2017, tech has sort of been, you know, a little bit out of fave since the election, and then the banks which are leading today. and really continue to be the story as rates go higher. the argument for so long around the financials was, well, they're cheap, they're cheap, they're cheap, they're all trading below book value and it really didn't matter when interest rates were low because there was no real impetus for investors to buy the banks. and that story has dramatically turned whether it is expectation of lower regulation, higher interest rates helping the financials, and that continues to be a major story as almost daily the banks are the sector leading the way. maybe they take a breather here and there, but they have been the key leadership group. >> all right. well, the dow is off the highs today, but anything could

happen. thanks, scott. now we'll get to the cme group, rick santelli has "the santelli exchange." rick? >> thanks, jon. you know, i think it's absolutely crucial that the market has a good day today, and i'm specifically addressing the stock market. look at a two-day chart of the dow jones industrial average and remember, yesterday's high was 19,966. now, as a i look up on the board i see that the high's fall an little bit short of that today, 19,951. normally i would say a couple of things. i think it would be important to take out that intraday high and make it higher than yesterday's 19,966. that was made, by the way, a little after 2:00 eastern time, so a bit after lunch. if this market is going to go today, not only do i think it will, but i think it will go around the same time. so i think if 20 k is in the cards it will happen around 2:00 eastern time. if it doesn't happen, does that

mean we can't get there? no. but i think if we close lower on the day, that would be really detrimental. now, is 20k a bad spot to take some profits? absolutely not. but that mentality will increase dramatically if we start to back away from it, and taking profits doesn't mean you don't think 23,000's in the cards, okay? just prudent capital management. but the real issue today is why it's so -- you know, on one hand you have things like hope and ol optimism. to me they're not necessarily synonymous with confidence. what's the difference? the underpinnings. many times you could have hope or confidence when you know conditions aren't really up to snuff but you hope, you hope that maybe something can happen, a market could climb above a certain level. i think what we've witnessed since the election and you could argue how much of it will ultimately be true, but my personal belief is a lot more than january net yellin thinks because i think the confidence here is there are very specific

issues that have created headwinds for the u.s. economy that we now have a better ability to address than we have had in a while. both strategically in terms of certain administrations believe government top-down knows better versus those who move the elect a candidate that was highly unlikely six months ago that believe there's more of a bottom-up approach. now, investor confidence, confidence, confidence is absolutely key and another area that is key is the fact that we want stocks and treasury rates to kind of dance the fox trot together. and that's hugely psychological as well. they will feed off each other in a good way unless we start to back much further down today, and then it will be the janet yellin approach that rates are going um but i'm not so sure what's going to happen in the future. kayla, back to you. >> rick, i'm going to borrow your term -- y20k. i love that. that's great. thank you, rick.

when we come back, financials, one of the sectors leading this market rally as we're closing in on dow 20,000. much more "squawk alley" ahead. [engine revving] ♪ ♪ is it a force of nature? or a sales event? the season of audi sales event is here. audi will cover your first month's lease payment on select models during the season of audi sales event.

the financial secotor is leading a broad based rally today. take a look at a sector that had so much pent-up demand, left for dead for so many years and now the election turned around its fortunes.

>> not only was it one of the most underperforming sectors this year, it was for a decade. lots of pent-up negativity it turning into positivity since the election. in terms of today's rally i think the focus after selling off a bit yesterday has just been on that core benefit the banks see when rates go up. we've seen all of them hike their prime rate today. of course the prime rate is the call ending rate they anchor all lending activities off from 3.5 to 3.75 for most banks. the hike is immediate and full matching the fed funds rate increase. for savers none has been passed on. it will be more slowly, and that just brings back how positive this start of the interest rate cycle is for banks. >> it is amazing even apart from interest rates, apart from the underlying fundamentals there have been some tumultuous leadership changes at these banks thinking back to wells r fargo in the fall. now it's made up all of those

losses, up 2% on the year. goldman sachs in any other market would have probably sold off on gary cohn, the former president/coo's exit. they're getting a lot of moves they wouldn't have otherwise been able to do. >> definitely. the cover there, your point applies more to wells fargo than to goldman sachs. a lot of analysts say this is a positive change because the leadership has been stale. he's been doing a great job but that's demoralizing to some of the leaders a level below and the slight shuffle gives them encouragement and mike mayo saying it means they're not going to lose another level of leaders below had a. on the wells fargo, absolutely right, this has taken the focus off both the runup to the election and the post election rally, it's taken the focus off the elections there. we've had a reminder of those in the last couple of days. that's something to remember. >> a different side of the financial story, one many people may not care with about but we do. i have a bunch of good friends that work in it banks and trading desks. do you know what they've said about this? my goodness, maybe now we can

start to rehire people again because for the last decade or so they've been laying people off, trading volumes have not been there. not just in the financials but across all platforms, and i think we're seeing a level of job optimism on wall street, wolf, we have not seen in a long time. >> optimism -- you describe it ats euphoria. goldman sachs announced the new batch of partners and a source in the room told me the mood was downbeat. it was prague natick and forward looking as you would expect but it was pretty down beat. across the sector huge optimism and we had that earlier today when david faber interviewed the co-head of the investment bank. very upbeat. >> we know it is 100 basis points until the banks really get some cushion on their bottom line, so a little bit more room to go. >> a little bit more room to go and they're not in super prof profitable mode yet.

>> the spread is narrow. >> between the short and long end you want more of a spread but the improvement comes fastest at lower levels. that's why they're off to the races. >> thank you. when we come back a look at the biggest dow gainers since we hit 10,000. closing in on the all-time high.

welcome back to "squawk alley." we are makinging the move, just about 75 points away after a two-thirds of a percent gain in early trading. take a look back at the last time we crossed above into that 10,000 mark between 10,000 and now. what stocks have led the way? among current dow members yunitd health care up during that time. home depot shares, 400% gain. visa, 329%. and apple shares 325%. again, this is current members of the dow and how they've done since that mark. as for the dow overall, keep an eye on this, kayla. we talk about the momentum, a lot of the relative strength in the market here. if you look at united health right now, 546,000, the dow industrials overall 18,162, kayla. that's the 200-day average price. we're about 10% above that right now, kayla. that is a stunning chart

right there. you point out that a lot of those best performers weren't in the dow since 20k. we traded at&t, alcoa, hp, bank of america for apple, goldman, united health, visa, nike -- it's a changed index for sure. >> that's for sure. >> all right. let's send it over to scott wapner in the house with "the halftime" crew. all right, guys, thanks so much. welcome to "the halftime report." i'm scott wapner live at the new york stock exchange. our top trade this hour, the rally and the risks. stocks resuming their climb today led by the banks which are getting a boost from higher interest rates that leads to our question today, can yields in stocks keep rising together, or does something have to give eventually as the dow creeps to 20,000. doc, it looked like it was going to get there earlier and then sort of hit the pause button, with which still seems to want to go higher.