>> just saying. >> happy holidays, kayla. >> happy holidays. >> i will see you tomorrow. >> maybe not. >> but maybe. >> let's talk about i'm predicting you're going to be here tomorrow. >> i'm supposed to go on a little vacation. >> i know you are, but if we hit 20,000, you need to be -- would you not come in if it hit 20,000? >> i'm going to walk around new york city. >> don't put it on. all right. make sure you join us tomorrow for the big celebration. no, we'll see. "squawk on the street" is next. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer at the new york stock exchange. david faber is off. 20 e leasive points, premarket suggests it might be a touch farther from the open. we have nike and fed ex earn, some slight losses in europe and oil inventories in about 90

minutes. road map begins with dow 20k, can we finally crack that elusive milestone? nike giving a boost to the dow after good rut results in europe and clie na. some higher spending cutting into the bottom line for fed ex. all right, jim, you and i were here yesterday when we got within 13 points. >> yes. >> any reason today could be different? >> i don't think so. i've been watching nike. i did a lot of work on nike last night and this morning, and there was a time -- obviously it's a, you know, the way the dow is weighted nike needed to have a big move up, 7% in order to be able to get it so everything else stays flat we can break out. and it wasn't a great quarter. and it was an actual confusing quarter. i felt for these guys almost existential crisis refusing to admit -- some saying basketball is back, some felt basketball didn't go anywhere, just did for

them because of under armour, then athleisure. we were asked to look for a lot and i was counting on that stock to take us there, and i don't think it has the mojo. >> a lot of talk about the declining correlation, they would argue, between futures orders and revenue growth. >> well, mathematically, yes. mathematically, yes. the future orders really not doing anything like the guidance. the guidance is very -- these are great. this is a great company. and when you read shoe dog by phil knight, by buck, it's all future. so obviously he wrote that book before direct-to-consumer. and i don't mean to highlight nike here and jump the cue, it's just when i look at what's happening between yesterday and today, now we need oil inventories down. so let chevron and exxon do the lifting. don't want to be too granule lar, but we need to see banks up, let the banks do the lifting so we don't have the setup other than we're all tired of talking about it so wish someone would buy it to take tlit. >> sort of the discussion we had in part yesterday. oil for a while this morning was

on track for another 18-month high on a closing basis. >> yeah, i was hoping oil could do it. api numbers are not as significant to me as the eia. what i'm hearing about in oil is it's more of a natch rag gas market than oil market and they're not correlating anymore. all of a sudden the strong dollar doesn't help. so we don't -- may not have that going for us. so what we need is someone making a stand say on a proctor, and unfortunately we got one. >> yes. >> buy to hold by stifel. thanks for nothing, pal. i needed that one to go up too. >> of course i was reminded when i saw -- i thought of you this morning, because it was last week deutsche took it to a hold as well with a price target of 90. they said no new catalysts. and then a couple days later you used it as a reason why a stock could look past a downgrade like that. >> yeah, i mean, i think proctor has a lot of levers and i don't think this includes any of them. the company is a very smart company and they can do a lot of things. my friend stephanie link was talking about this is the group

you can't be in. now, if the dollar stays -- we have intraday weakness in the dollar, you can kind of craft a story. you're losing the deflation story. overall you have this general mills aura over these which is like, no, we don't want these, we want caterpillar. but we have the caterpillar retail numbers yesterday and they weren't that good. we need trump stocks. nike by the way not a trump stock, not a trump stock, not a trump stock. >> yeah. as opposed to for instance a monster today where the upgrade is largely you want companies who are u.s. centric, who can benefit from a corporate tax reform, no complications. >> right. nike didn't have the their biggest tax break. remember, china is the biggest growth area there. so we always have one eye on who the chinese communist party might punish. does the chinese communist party like michael jordan? i mean, it gets a little granular. remember, they could say, listen, we think that no longer

represents what we favor. carnival cruise by the way, yesterday, a fabulous quarter, talking about how they simply do not have enough ships to meet chinese demand. chinese communist party likes cruises, do they like basketball shoes, do they like starbucks, do they like yum? kentucky fried chicken? we don't know. what we know is none of that matters, it's what they decide to strike against, apple with the assurance they make a lot of parts there, they want to have that assurance in india too, but we all have one eye on twitter not just because messenger left cto an incredibly important guy, but one eye on it because if trump says, listen, i don't like what's happening in the south china sea and i don't care what they do to some of our exporters, which would really be rather radical. >> so everything we just talked about, does that mean this rotation you've driven a thesis upon, right, where the money comes in and moves around, doesn't exit, are there limits to that? >> no, i don't. a lot of that is because of dow 20,000 or at least the rubric of

it. i think people are back. i think people want to own individual stocks. >> because all of that feeds that. >> yes, what's interesting it's not facebook, it's not amazon, we probably have to talk about that strike because that's probably significant. and netflix gets a big push today. it's not netflix. these are not the stocks people want. they want companies we haven't heard of in a long time. i've seen so many theses for the regional banks and for the national banks, they make sense to me. even up here with the exception of maybe goldman where i'm thinking at 2.60 up 100 straight points that's a lot to digest. >> yeah. so your point is kpaebs they haven't heard of in awhile. >> yes. >> example. >> okay. >> emerson? >> emerson i didn't like the orders that much. here's a good one that i think people are going to want to focus on. it's a big internashlg company. but let's take a very good technology company, beat earnings, once again give you negative guidance. once again down five, accenture.

tomorrow there will be four analysts to tell you buy, why? because it's a high quality company helps you understand technology. all of these companies when you're on a conference call, darden talks about technology how they can get a $6 meal to you which by the way is so good. i had the $6 with my daughter, you have the technology on the table. everything. you don't have to speak to anybody. my daughter is 22, they speak to no one. that just ends. they speak to no one. look at technology everybody is trying to figure out how to integrate technology, nike spent a lot of time on technology. they say we don't know what we're doing you call them and i like that stock being one people say, i don't know, no, you should know it. i use that because it's down today. i could pick any one of the stocks that are rotating. i could pick broadcom as being a company that could go to 200 very easily. >> we have micron earnings tonight. >> i think micron is inexpensive stock. i think micron needs to buy in advance of micron.

flash, which is dram, which is very basic, goes into this stuff could then take advance micro, which has, yes, gaming chips. and gaming as we know from the king, from the triple crown winner of nvidia, i can't believe no one upgraded nvidia today. it's like set the clock, my apple watch -- oh, look at this. upgraded nvidia today. >> you give us a note each morning on the research, and i think you're line was you have to be kidding me. >> yes. well, because they went from buy to conviction buy. so then i started thinking did they not have conviction? did they not have conviction when it was just a buy? i mean, come on, guys. >> let's get to fed ex. down in the premarket. missing estimates by a dime. quarterly profit 2.80. the company did see higher volume compared to a year ago but margins were down, spending a lot on ground here, jim. how much of a macrotell is this right now? >> at one point fred smith who is an economist by nature who's the chairman, i'm not saying he lashed out at the analyst, but he did say, listen, guys, he

says a thing here seems to be not clear to a lot of people these huge facilities opened up at fed ex ground are being opened with firm belief that our fed ex ground traffic is going to grow. well, i sure hope so. the amount of money they're spending is unbelievable. amazon is taxing the whole system. it's taxing the whole system. i think that the amazon prime and the ability to be able to get something instantly is just reflected throughout the whole system. fed ex has to spend. that said, i like fed ex down here because i have total faith in fred smith. i do believe all this spending will be rewarded. i know they missed on a lot of different lines. they missed, just to be clear, they missed on ground, they missed on freight, but they didn't really take down numbers. and so sticking with 11851235, so i can argue this is not a bad number but the street wanted more given the fact there's supposed to be so many packages being shipped. you're not making money on some of these packages. >> mention amazon, see the echo is now sold out for christmas?

i think the earliest delivery now is the 29th maybe for a basically brand new product. >> they got my voice on one of these and i thought it was one of the coolest things. you know, echo is very cool. again, it replaces -- you know, my daughter won't talk to me, she'll text me, but echo talks to me -- just kidding, she doesn't know i have a morning show. but it's very polite. >> yeah. interesting after watching zuckerberg's video yesterday for jarvis where he demonstrates a.i. within his own home voiced by dominic freeman. >> dominic chu revealed that morgan freeman, that made me like, echo, i like her, but morgan freeman, the voice of god? if he tells me to wake up at like 3:30, hey, forget everything else. i'm up. >> we used to talk about the battle for your living room, for instance, right? now it's just a battle for your house. >> it is. >> your car. >> and apple's in there too.

any comcast or parent company that's very much in it. the battle for your house, i think, is exciting. because it gives you a few more minutes. zuckerberg is about task and a few more minutes. i want a few more minutes to be able to read, to be able to put the game on, anything that makes it so my life is easier that i can just talk to my house and my house does what i want, i actually like those things. i'm tired of the, let me tuck the shades down. the wife left the shade up, i wanted so much to say to her will you put the shade down, but no, rather just talk to echo or jarvis, morgan freeman. morgan freeman, sometimes my wife gets angry. morgan freeman is never going to be angry. >> no, we tweeted earlier this year when we had him on binge we asked him who he would want to narrate his life and he said jack -- >> i thought you were saying jack dorsey, i'm quitting. >> no, jack nicholas. we were making a list of all the executives who have left this year --

>> yeah, forget it, jack, it's twitter. >> josh mcfarlane gone as v.p. of product. >> and then adam bane. >> last month. >> i don't think people realize adam bain was like lou gehrig. you know, there was ruth, every time you got mad atd twitter you said i don't want to get mad at adam bain. now, messenger, we know -- a lot of people feel twitter is underinvested on tech. so when the cto leaves it doesn't give you a feel that products are about to come out. the turnover there would be indicative of me to problems at the top. but i have indicated that a guy who has two -- the ceo of two different places, steve jobs can do it, but is there anyone ever that has been on this planet like steve jobs? >> yep. we're going to watch that later on this morning. you see twitter down 2% in the premarket. we are on dow 20k watch, again,

look at the premarket. dow has had 17 records since the election. has not had two back-to-back losses since november 4th. >> come on. this is like camelot. >> it is. a lot more "squawk on the street" from post nine in just a moment. , chevy was great in tha. who played the wife? beverly d'angelo! juliette lewis costarred as the daughter. oh, i think it was um... chris columbus was the director... it's called claymation... narwhals really exist... actually guys, it was the ghost of christmas past... never stick your tongue on a frozen flag pole... yukon cornelius... "die hard" is considered a christmas movie! that's the unlimited effect. stream your entertainment with unlimited data when you switch to at&t and have directv. sometino big deal.shing my gums bleed. but my hygienist said, it is a big deal. go pro with crest pro health gum protection. it helps prevent gum bleeding by targeting harmful bacteria on your gums. left untreated, these symptoms could lead to more

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with about a month to go in his final term, president obama

has moved to permanently ban offshore oil and gas drilling in areas of the atlantic and arctic oceans. he's invoking a provision in a 1953 law that governs offshore leases. opponents of this move are hoping the president-elect will swiftly act to reverse many environmental regulations once he takes office. it's been said, jim, that if this goes to court, if congress tries to challenge obama on this, very little precedent to go on right now. >> yeah. i think we have to understand some of this is ceremonial. there is very little in the atlantic. we know there is some in fact arctic. the cost of getting out of the arctic would be prohibitive, i would say, maybe 150, 160 price of oil. but anything could happen with the price of oil. but i think that there are so many places -- we forget that there are so many places you would drill well beforehand there that really that's kind of like on the beach. it's like -- remember you were saying about some shows that they're all kind of apocalyptic.

>> huge hits. >> i think people should understand there are a lot of places in the arctic that have not been plumed that could still produce a lot of oil given the fact we've lowered the cost of oil dramatically. >> so these deep water offshore canyons you don't see as material? >> not at all. and the amount of -- they've never really had great luck even just exploring that area. there's lots of gulf of mexico that has not been explored yet, amazingly. and gulf of mexico is very fertile. >> so your point is to keep your eye on the classics, the permians? >> yeah, i think you ought to keep your eye on the price of drilling. when i had pioneer, xec and pxd, these are amazing companies. you talk about drilling costs all in $35, $40 for areas that are very accessible. remember the pipeline cost of bringing it -- i don't want to drill the arctic. last thing people think he's already summed up the arctic, but pipeline costs of bringing it down are just extraordinary.

took forever to bring down from the bay. one of the reasons why permian oil is so cheap is there is a lot of pipe. remember, they have so many areas to go back over in this country that arctic would not be on the agenda lest we went through the roof and there was kind of an ice age. seems to be going opposite of an ice age right now. >> i'm curious we mentioned this proctor downgrade this morning out of stifel. they mentioned cost inflation, they mentioned forex, but they also mentioned geopolitical uncertainty. i'm wondering if that applies to oil companies or not right now. >> you know, it's funny you mention that because rex tillerson is going to be, well, if he's nominated secretary of state, you would think there's a guy who speaks the language. i mean, rex tillerson, i think, understands. he goes to places you and i might not go. i remember once rand gold ceo dr. bristow on you're looking for gold in this country and that country, i don't know if i

would go there. he goes, no, jim, it's not for s sissies. kind of stopped the dialogue. rex tillerson goes where it's not for sissies. >> over and over again. we will get cramer's mad dash, take one more look at the premarket as we close 25 points away yesterday from dow 20k, more "squawk on the street" after the break. my business was built with passion... but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. with it, i earn unlimited 2% cash back on all of my purchasing. and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... which adds fuel to my bottom line. what's in your wallet?

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♪ just about eight minutes until the opening bell. let's get cramer's mad dash. there have been a lot of bombs in apparel, but -- >> yes, finish line may be kn nuclear. thank heavens for honesty, disappointed third quarter sales and earnings per share fell short of expectations. wall street looking for 95 cents. they think going forward they think it might be 68, 73, that's important because that's the holiday season. they did point out those who want to read through to macy's that, no, macy's is doing quite well for them. people understand the difference between finish line and foot locker, finish line gets the secondary nike versions. it's very clear, they will go to foot locker, but this is distingts disappointment and one of the reasons why i did say to myself don't get too bullish about nike, because everyone though nike's best goes to foot

locker, this was a real wakeup call about how badly they're doing looking for 411 million -- 371 million, comps down 3% to 5%. that is highly unusual how bad that is. >> and as bad as footwear may have been, it was not apparently as bad on accessories -- >> i know. what it reflects on and what has happened, i'm told cold weather has boosted apparel in the last few days. we have this confluence of christmas and hanukkah. the bottom line is finish line some people regard it as finished. >> yeah. after last week where some of the worst of the s&p-ers of the week. >> yeah, keep going back to that matthew boss piece saying nordstrom worst since 1972. i am going to the mall tonight and save a lot of companies. >> okay. bring your wallet. >> yes. faber came with me wouldn't add

anything. i know he wouldn't buy a soft pretzel. >> he's probably listening right now. we'll get the opening bell in about six minutes. don't go away.

you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in just about three minutes on this wednesday. once again, dow 20k, like it or not, is in the cross hairs. we closed yesterday about 25 points away. a lot of talk this morning, jim, about sentiment. investors intelligence now has 59% bulls. >> these are all -- well, let's distinguish that is a number that's way too high. i follow this s&p proprietary oscillator and i pay for it and i've sworn by it since '86. and it's not as high. it's still below 5. below 5 means you don't need to sell or panic. the whole rally it's never been overbought on the s&p oscillator. i've seen it go 10, 12, 15, also seen it go during the great recession down minus 15, minus 20. >> sure. >> so that is a little

reassuring for me. we got the baltic chart freight this morning it was up for the first time in a long time. i'm not trying to create an alibi here. i'm saying this rally has been done through rotation and it's not parabolic. we've seen rallys that are parabolic and they are do you mean e doomed to failure. this believe it or not is not a parabolic rally. you'll have j.p. morgan go up very big and stop. you'll have it apple go up very big and stop. you can just go over, ibm, 169, stop. proctor, 85, stop. and so what's happened is that just when you think that we're going to go parabolic and stocks are going to go straight up, they pause, and new money comes in to buy other stocks. bank of america was a rocket from 16 to 23. have you noticed that stock has just stopped? ge was 29 to 32, looked like it was breaking out. no, stop. so i just point out that it's a rather remarkable rally and it doesn't have any whack-a-mole. >> sure. >> other than of course the

triple crown nvidia, which i guess tweeted, sorry adam messenger, i know you're gone. chief technology officer, cto, suddenly he's really important, like, wow, he left. i didn't know he was until today, sorry. no one pushed nvidia, but nvidia's been a great -- this is one of the great companies bought linear technology, it's an internet of things. remember the reason why nvidia is such a code word it's internet of things and there the explosion is driverless cars. the number of chips, the amount of information, the storage, let's not forget there are a lot coming down the pike that justify the numbers. >> international trucking literally just getting started which would be one of the earliest test cases. >> holy cow, commercial trucking down 30% this year for the major manufacturers. to see that move up would be extraordinary. remember last week remember what moved up things? at&t and verizon. looked like they were going to

the moon, alice, and then they halted. i know everyone wants to kind of have one foot out the door and i'm never going to say there's anything wrong with taking a profit, but ooimg not saying it's not that kind of insane rally where you say that's crazy. >> let's get the opening bell and s&p at the bottom of your screen. bio bus used to educate k through 12 students in biology basics. at the nasdaq gabelli funds celebrating the recent launch of gabelli media mogul shares. good for gabelli. >> yeah. i saw a minor upgrade, i say minor don't want to make fun of a particular firm, not necessarily the front guys coming out saying things. it looks like, carl, there are people taking vacations despite the dow 20,000. >> yes. we're still in some secondary,

tirs yar -- >> yeah, i came early -- it's the first time i've come early to a din they are year. and i just want to point out that things are very thin. that's not a comment on my driving. it's just a comment on the fact there aren't a lot of players. so therefore a big futures order could lift the market regardless of the components. i think that could happen today. >> speaking of research, we did get one downgrade of jetblue over at ray jay. >> yeah, i saw that. >> capacity growth, market expansion. they argue going to pressure down the road, it's underperformed the index. >> it has. i think that group has marched from the southwest being the umbrella there, marched from six to seven to eight times earnings. if oil stays where it is and we still get a lot of good travel like southwest indicates, then you got to buy those stocks if they just pause because they represent value. the western digitals, the component players in the airlines still represent value

for people who say did i miss, did i miss, did i miss. a lot of people come in and feel like, you know what, i'm left behind. go look at western digital. you haven't been left behind. go look at some of the retail thaers are not hurt by department stores that are doing quite well. the not been left behind. some techs not been left behind. if oil goes to 58, i can make a case for a lot of these. >> yeah, i was going to say that's going to be material, right? >> that will be hard because the futures out a couple years are showing it shouldn't be there. we tried to have a movement in the drug stocks yesterday. that was worth watching because we've been a couple -- a tweet or two away from destroying that group at all times. >> airlines as we said under pressure. not a surprise, foot locker, under armour, tjx, jim, apparel and footwear. >> a lot of those i think are overdone to the downside. i'm tempted to want to buy them. watch nike to see if it can hold. tjx is a beneficiary, people, my

travel trust owns it. you could argue there was too much inventory on the nike conference call although they kind of explained away. that goes to tjx. anyone who's been to tjx, guys, listen to me. they've had under armour forever. people say, oh, my god, there's under armour, no, i've bought under armour and tjx since under armour, so please don't take that away. but tjx is a place for macy's to be able to dump all their stuff for the hundred stores they're going to close. >> yeah. watching it 19,978, once again about 25 points away. >> apple. >> you know what got my attention today? w winnebago, multi-year high, beats by 11 cents, revenue ahead, tollable products, apparently, an area of strength. >> what people should recognize there's a company called thor. okay, thor is literally ten times larger than winnebago in terms of the amount of what they have for tow. i mean, in terms of share. and thor's been on a bunch of

times. and i want an airstream so badly, but i have to figure out where to put it in brooklyn. what do you do alternate side of the street move it? it's absolutely a company that's on fire. and thor is the better buy than winnebago. >> gas prices were up 10% year on year last week. you would think that might have some affect, but maybe not. >> no, what i'm looking for are bounces from yesterday. darden, i went over that conference call, it was quite good. carnival cruise, went over that conference call, quite good. i think those stocks could be leaders. paint checks reported this morning, they're on "mad money" tonight, i thought it was a fine quarter. i think accenture is -- i'm looking for individual stocks that could lead us by turning around literally this morning. fed ex is probably the most important one. >> there's a look at the dow 19,983. by the way, yesterday, although we didn't crack 20k, it was a new high for the dow, which was the first after having none for four days. it has not gone five days without a new high for 28 days.

so we're building in new highs at least once a week. >> guys have to recognize, this is a very rare occurrence, we've seen it a couple times. i know someone can say, yeah, jim, we saw it in august of '87 before the beginning of the crack those of us who remember that period that was led by merck on the way down. but this is much more sustained and it is not led by -- almost all the rallies that have led to just steep declines were led by individual stock groups. i defined a point a particular group other than the banks, which benefit from rate hikes which we know are going to have them that have really created this rally. which is why even though we have that investors intelligence number so high you can continue to justify buying. it's not insane to buy if you pick the stocks -- look, merck had some good news last week. they've had a series of good pieces of news. i'm just picking on merck because it's doing absolutely nothing except for just resting. and there's a stock down from 65. i can craft a story three ten

yield, 16 times earnings, ken frazier doing a remarkable job, yeah, you can buy it. >> yeah. meanwhile, your point about different leaders taking turns, today, goldman is the laggard. nike and boeing are the leader on the dow. >> boeing has been -- ever since boeing announced some orders and people worried about iran and president-elect said some things about them, boeing has made it very, very big comeback. it's almost like, you know what you really want, you want a call from the president-elect. united technologies now almost taking out its high. it's like call me. you know, call me, we'll do some dealing and then maybe -- one of the great lines that i think was missed in the whole united technologies other than greg hayes saying i was born at night but not last night was the president-elect saying, listen, i'm going to go push carrier. carrier. hey, you know, maybe hvac does better. i guess what i'm saying is a little insane right now and people are coming up with reasons to buy anything. united technology cut numbers. i thought they guided soft last

week. if you remember just one week ago honeywell said some things that some people interpreted as negative, now the stock is moving up. so we just -- the prison people use right now is extraordinary. i could argue that darden did not -- you know, someone could say, listen, november was soft. it didn't matter. carnival, a massive, massive forecast, that was bad. doesn't matter. and congratulations to carnival for triumphing over things i thought would hurt them. i did think zika would hurt them. that was dead wrong. that company is on fire. it's doing so many things. >> yeah. >> including it's tv shows. it's kind of a 360 carnival. >> yeah, a leader yesterday. >> yeah. >> watch these levels here. want to get on the record tesla expanding their credit line by $500 million. now has $1.8 billion available, although musk has tried to reassure the street that tapping it is not a high priority right now. >> well, i mean, what can i say? this is an era of good feeling that could extend to him easily. it's like i saw an article this

morning about how pizza is the place to go, pizza stocks are good. and i saw domino's off eight points. someone could buy domino's. i'm not, again, i'm not being facetious, i'm saying there are stocks down from their highs that people look at and say, oh, i can buy that. people are making excuses about reasons to buy. they are not making excuses about why they want to sell. i'm watching a stock on the move right now called paypal. and i'm looking and the stock has not moved one bit from the 39 level, suddenly, boom, and there you're going to get takeover talk. i'm watching yelp on takeover talk. i don't think either's in takeover, but you know what, hey, you know what, i can do it. i can say it is good. i did a chart last night on broadcom, $200 in the cards according to tim collins, very good chartist. again, these stocks can be on the move. watch altria off the idea wells fargo said there's a great chance phillip morris is about to reach out to them. >> as you say that i'm reminded of a note yesterday rbc talking

about how bad a selloff we could see in january. and i'm reading many who've missed the reflation trade waited for a pullback that never came. and if january were to see a pullback, they would use that period to start adding cyclical exposure. do you agree? >> if does get through which sounds like we have repatriation, lower corporate taxes chrks are really rather remarkable, and deregulation, almost every company -- last night analog devices say this would be great for us. what you don't realize is it would be great for almost all companies. so therefore numbers have to come up. so the valuation, if you're basing on earnings per share valuations going to go up, if you're basing on the animal spirits where we decide to just forgo mathematical equations and rely on optimism and impulse buying, then january, yes, if it fell it would be an opportunity. >> yeah. >> notice by the way you see these stocks like the dollar a little softer for a second. so what doi that do, carl?

they come back and say i'm going to buy a little j&j. i'll buy a little mcdonald's. next thing you know, what do you get? you get dow 20,000. don't have it yet. >> yep. for now at least 19,964 is what we're left with. we'll see what the mid-morning brings. let's use this moment to get to bob pisani see what's moving on the floor. bob. >> good morning, carl. as you can see we're down here, but we're close enough, what we're seeing in the action is very sloppy right now. there's not a clear trend in the market. so if you look at the sectors, we've got energy, materials up, utilities up a little bit, real estate's up a little bit, financials have fallen back after improving a little bit. they were market leaders then became laggards here. this is looking a little sloppy and indeterminate right now. there's not clear sector leaders like we had in november and the early part of december. i want to point out what fed ex's numbers were. you guys talked about it so i won't belabor it, but fed ex is trading on the downside.

i think more importantly is what our cfo there, the cfo of fed ex, alan graf had to say about potential tax cuts, if you think about our tax rate, would be a mighty fine christmas gift and all kinds of questions on the conference call talked about positive impact on economic growth and bottom line being helped in a very big way through the lower rates. so a lot of discussion about this on the fed ex conference call on the so-called trump rally here. so we're very close to dow 20,000. i think it's important to sort of explain a little bit how we got from dow 10,000 to dow 20,000 at this point. and there's three major factors in how we did it, and the most important one far and away is fed policy. that's number one. because the fed essentially kept rates lower for a lot longer. this forced investors into a lot riskier assets, like stocks, corporations turned around with that cheap money, they sold debt, they sold record amounts of debt. and they turned around and used it to buy back stock and

increase dividends. all that helped the stock market. the second most important factor is financial engineering, which helped improve earnings. so companies got very adept at cost cutting, they turned around and invested in new technology and of course using all of that money from the cheap money to turn around and improve overall earnings through buybacks. the trump rally, there's the only one, there's the third one, it's the only thing very clearly we have a number on, 1,600 points in six weeks. so 1,600 of the 10,000 point rally we've seen in the dow 10,000 from 10,000 to 20,000, 16% is due to what happened in the last six weeks and largely attributed to the expected effects from the trump macro plans that he's got. there are a couple other things that i think are important that got us from dow 10,000 to dow 20,000. we did see some slow improvement in the economy. give it some credit. we saw some stabilization in china. ugly year 2015 for china, had a lot of problems and that influenced us.

2011 was a bad year for europe. that influenced us. the whole greek crisis has stabilized a bit. and oil finding a bottom earlier this year is another factor in the rally. you can see there were a number of reasons why we went from dow 10,000 to dow 20,000. for dow 10,000, remember something, we were there 1999, but finally crossed it for the final time only in the middle of 2010. remember that? that was a long, long time before we finally crossed dow 10,000 decisively and didn't move up here. so it took more than ten years for that to decisively happen. i want to point out that the rally was much bigger than just that dow 10,000. if you look at the s&p 500, we bottomed in the very beginning of 2009 and essentially the s&p was close to 700 at that time. we have now rallied 200%. this is one of the greatest bull markets we have ever seen. i think that's very important to point out right now. so here's the state of the market where we are right now. we essentially topped out last

wednesday. but it doesn't matter. there's been no stock for sale. nobody's going out saying, boy, i want to get out of this thing. everybody is praying for the market to drop 5% so they can buy more. the psychology is still on the optimist side on the bullish side. so instead of selling off, people don't say i'm out of here, i'm getting sectors, i'm out of here. they're turning around trying to rotate into other sectors. but as you can see today it's getting a little more tentative. there's not a lot of trend anymore right now. that's why it's getting harder to finally get over this dow 20,000. but we will get there sooner rather than later. guys, back to you. >> okay, bob. bob pisani. let's get to the bond pits. rick santelli at the cme in chicago. good morning, rick. >> good morning. how are you doing, carl? when i look at the markets today i don't see a lot of change in the fixed income side, at least not in the u.s. and of course while we're all on 20,000 watch, everybody's trying to debate what investors are thinking. bob did a great job, but i would draw your attention to the mortgage market maybe for a good analogy as well, conventional wisdom, rates go up, housing

industry's goose is cooked. but yet if you look at some of the recent data, the sit on the fence crowd, those thought rates would be low forever, it's now they're in the box. your move. and their move seems to be, hey, maybe we'll sprint a little faster trying to look for a house. i think the same analogy holds for stocks. there's many investors who for whatever reason didn't see this light at the end of the tunnel 1,600 points ago. maybe they're just sitting on the fence. what do you think their next action will be? certainly not a lot of retracements on these moves. so we're down two basis points at 2.54. we're up 27 basis points on the year. and we're hovering. if you look at a one-week of bunds, a little bit different. you know, they're drifting. and it's very strange. they're drifting right about now. if you opened a chart up to beginning of november, which is so great, so many huge moves, you look at tens, you can see the way they're just kind of flattening at the top of the range going back to september of '14. if you look at the same timeframe for tens minus bunds,

it's been an explosive separation. that means while our rates are going up and sticking, their rates are slipping, slipping, slipping. and if you look at a chart of italian tens, this speaks volumes. look at how their rates have come down. why? their banks are basically insolvent, their country has many issues. it's this test tube stuff that we're starting to flush away in this country. believe me, the rest of the world's going to look at our markets, their capital leaving coming here and elsewhere and they're going to change as well. two-day of the euro versus dollar, yeah, the euro's had a bounce. it's all counterintuitive in europe. if you look it's almost exactly 14 years christmas since last time the euro's closed here against the dollar and it's no surprise the dollar index is also at 14-year highs. carl, back to you. >> good stuff, rick, thank you so much. our rick santelli. meanwhile, watch the markets relatively mild open. 19,970, current level down about six points as you see on the board, boeing, nike, utx leading

the charge. goldman for once the laggard. we're back after a break.

dow 20k once again the story of the morning. we're down about ten points to 9,964, again, the debate about valuations, would-be policy complications, sentiment, colliding with expectations for stimulus, seasonality, pain trades, jim. >> yeah, i mean, that's why the tug of war is kind of equal right here. i urge people to recognize that with a very thin market someone who just might want to just get this thing done, move things up, which there are people who will do that, move things up and keep it up, might just come in with guns blazing here in the futures market. and it could move all these stocks. and we could be trying to figure out, okay, why did shelchevron o

119 -- the answer is futures moved it up. the 1030 mark with the inventories will be a reason to come in if inventories are down and buy chevron and exxon. those are big caps that could influence the index. the one everybody's watching, ka carl, is apple. >> really? >> yes. people are saying, look, it's kind of a trump stock in many different ways with the exception of what could happen in china. >> trying to breakout. >> yes. this is a stock a lot of the chartists are saying to me it's either going to be thrown back at that high or really burst through. and so apple is the one that if it got through to its most recent high would be the one that people say, oh, we're done, we're done. >> interesting. yeah, that battle with 117, 118 here trying to get back to what would be a new 52-week high. >> that's a dinner canceller. >> you mentioned oil, if we settle above 53.51, which is about where we are, that's a fresh 18-month high.

so you're saying inventories could be tough? >> that could be important and natural gas is up again, now uncompetitive versus coal but very hard to switch back and forth. remember we're still a coal based system. a lot of people forget that. you know, our base thing that our system works on is coal. i don't want to be more technical than that, but that is something that is stabilizing, which is why the rails, let's watch the transports, could be a real hope to move the market. >> we'll get stop trading with jim in a moment. dow's down ten. don't go away.

time for cramer and stop trading. >> huge rally in the natural gas stocks led by southwestern, which is almost pure natural gas. i point this out because i think people have to understand when we hear about the president saying banning the arctic, what we really have a lot of in this country is natural gas and we are blessed with mar seseilles utica, but cabinet is doing very well range and these are important and the reason why is because that's american manufacturing. you need pipes, that puts tens of thousands of people to work. and you need -- this is the lowest cost natural gas other than in kuwait, and so therefore

it can produce jobs, we can't get that stuff from kuwait. it can ols produce jobs in big export market. it is the bright light of 2017. it's also a cleaner fuel. i know that people who don't like anything out of the ground, don't want to talk about it, but watch natural gas because 2017 could be the year of natural gas. >> interesting, on the first day of winter, how appropriate. >> i think it's worth watching because that's what we're good at. >> what are we doing tonight? >> we have paychecx, stock historically traded down after reports, nothing new here, but a big beneficiary of the flow which is when interest rates go up, when you buy it. marty is a fantastic executive. i can't wait to get his read on how this country is really doing. >> yeah, all-time highs lately on paychex. >> it looks a little ragged today. maybe it's not going to be our day to have our big -- >> now that you said that -- >> now we can move. >> make sure your plans are flexible, jim. "mad money" 6:00 p.m. tonight. when we come back, more on the

market rally, or in this case the mild market losses. dow's down 12. don't go anywhere.

♪ nchs good wednesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, mike santoli at the new york stock exchange. david faber has the day off. we're down about 12 points trading a little more messy this morning as we see some rotation, goldman the laggard on the index today. we have some breaking news this morning, some charges being filed as federal prosecutors gather in new york. dominic chu at headquarters has that for us. dom. >> -- securities fraud later on this afternoon at about noon preet bharara, u.s. attorney in new york, is going to basically go through a press conference talking about these charges. it involves the new york state common retirement fund and one of its fixed income directors and portfolio managers in the allegations being put forth it's alleged that this particular

fixed income portfolio manager took bribes in the form of lavish entertainment in order to steer business allegedly to two different broker dealers. the people on the other side of that trade, or the people executing these trades, debra kelly, which worked for broker dealer number one they talked about, and then greg seanhorn, broker dealer number two, in essence what they did is provide entertainment and list through some of the actual things that happened. it said that kang received allegedly in the form of bribes entertainment, travel, lavish meals, prostitutes, nightclub bottle service, narcotics, luxury gifts and other cash payments among other things in exchange for fixed income business from the pension fund itself. so these are, again, allegati s allegations, both of these separate indictments are six counts each. they have things like wire fraud, securities fraud, all will be talked about in depth at noon later on today.

that's what we know from these two indictments we have in our hands. we'll bring you more as we have more. noon is the press conference today, carl. back over to you guys. >> thank you very much for that. dominic chu at hq. meanwhile, getting through existing home sales numbers. for that let's get to diana olick. diana. >> well, carl, existing home sales up just a little bit, 0.7%, to a seasonally adjusted annualized rate of 5.61 million units in november. the october number was revised down slightly, so it's actually basically flat and just what the street was expecting. the realtors put out a very large year over year number, up 15.4%, that number doesn't mean anything. here's why. in november of 2015 that was when the new mortgage rules went into effect, remember, they were called trid and really delayed a lot of sales. pushed them into december. so december sales last year were artificially low, so sales are up from a year ago but definitely not by 15%. we did see another drop in inventory. that's the big problem in this market. just 1.85 million homes for sale

down 9.3% from a year ago to a four-month supply. we were at a five-month supply a year ago. balanced is considered a six to seven month supply. that low supply is pushing home prices higher, the median home price in november $234,900. that's up 6.8% from a year ago. so easily outpacing income and wage growth. and with mortgage rates rising, that's going to mean some trouble going forward. now, remember, these numbers are based on closings in november. so the rising mortgage rates we saw just after the presidential elections, these would not be factored into these sales. but we will start to see them show up in sales going forward. one more note, the first time buyer just 32% of the market edged back a little bit in november. back to you guys. >> all right. that might help explain the strength. diana, thank you. keeping an eye on the broader markets here at an all-time high as the dow edges closer to 20,000. it's off just a bit about 40 points away. this after hitting all-time

highs yesterday. joining us now to discuss where we go from here, fidelity investments director global macro, and paul christopher, wells fargo investment institute have global market strategist. so as we march higher, does it make you more bullish or more nervous? >> well, good morning. you know, dow 20,000 to me is like new year's eve. you know, it's really just another day but it's an opportunity to take stock of where we are. but essentially it is just another number. but to me it's poetic that we're reaching this milestone as we are embracing sort of the promise of a baton pass, if you will, from monetary policy to fiscal policy. and, you know, it couldn't have come at a better time because monetary policy has been pretty much exhausted all over the world. so it is a sign of hope that we are going to get finally that escape velocity the fed has been talking about for so long. as we know growth basically solves everything.

if we get more growth, it's easier to get out of debt and it's easier to put more people in better jobs, et cetera. so it is an important sign in that sense. >> okay. we'll take that. paul, it's also got to be an important technical level, a sign of confidence and potentially something that brings retail investors to the table. what is dow 20k mean to you? >> yeah, that's exactly right. we are seeing some additional optimism from investors, our wells fargo gallup investor and retirement optimism survey at a nine-year high and three consecutive quarters up, we are seeing investors take more optimism not just in the new administration but also in the broader economy. that has actually a longer trail to it than the recent election. so we are seeing investors with some real reasons to be optimistic. we continue to like large caps here. >> paul, what do you infer from that surge in optimism? i mean, aside from the fact people are a little more confident, people are looking

back saying you see peaks in consumer confidence and sometimes investor confidence when the markets themselves have already built in some of that good news. how does that play into the market outlook? >> right. you're absolutely right. we will, we think, have a chance at some point in the coming months, maybe even in the coming weeks to take some profits here. but we continue to like stocks for the longer term, on a tactical horizon 12 to 18 months out we would still be overweight stocks at this point. yeah, you're going to have some uncertainties next year. sure there are going to be some bumps in the road for the international economy. and there are going to be some pullbacks. we'll take those to buy. >> the banks have been a major driving force behind this rally. goldman sachs a huge part of the dow's rise toward 20,000. does that make you more confident that you're seeing a cyclical sort of lagging group that's lagged pretty much throughout the recovery in charge now? >> i think it's a very good sign that the market is back to sort

of normal sector leadership if you will. the last few years have been marked by very unusual leadership. investors flocked to the secular growers like tech because there was no growth to be found elsewhere. and with interest rates falling as they did until about six months ago, investors were flocking into the bond proxy which is also were a very unusual type of leadership because those stocks usually preserve value on the downside but don't necessarily lead on the upside. and so now with this new regime in place, right, so investors have had to adjust from secular stagnation forever, basically, to all of a sudden inflationary growth regime or at least that's the expectation. we're seeing, you know, leadership return to companies with pricing power, financials, industrials, and that's a more typical leadership in a rising market. so i think that's a good sign. >> jurrien, i was curious, you use the term escape velocity, largely attributed to summers who remains fierce critic of a hawkish fed. i wonder what is the dovish

argument right now, if any? >> well, so the fed as you know last week tilted slightly more hawkish although i think that's probably a little bit overstated, if you read sort of in between the lines. but clearly the fed believes and so do most economistsrobably that the economy's at full capacity. that a fiscal boost would have been more helpful a few years ago than right now. and basically any growth over and above where we are is going to bring us above the speed limit, which means that the fed has to lean into it and try to sort of sterilize it. i think that is a negative in terms of reaching sort of a permanent higher level of growth. i don't buy into the 4% number. i just don't think that's achievable unless productivity starts to increase. so i do think the fed will lean into this. and with potentially higher inflation, i also think valuation is an issue in terms of the interplay between price and earnings. you know, as you know over the last seven years price has far

outperformed earnings with the p/e going from 10 in 2009 to 20 now. and i wonder if we're not going to see a reversal of that over the next few years where price goes up but earnings goes up more and that allows valuations to contract to something more of a normal type of p/e. >> that's sort of an interesting idea. paul, do you agree that those are some of the risks to this rally here? the fed no longer being gradual when it comes to rate hikes and the valuation argument? >> yes, it's possible. and some of our work does suggest by the end of next year, especially if inflation gets closer to that 2.5% threshold that the fed says they're watching, that you could have investors start to worry about potentially a more aggressive fed in 2018. we don't see that as a problem for most of this coming year, but again, at the end of next year that could become an issue. >> we'll see what happens. thank you both for joining us as we look to the dow now down six points. just a little over 30 points away from 20,000.

jurrien timmer, paul christopher, good to see you both. >> thank you. when we come back larry kudlow will join us at post nine and get his take on this rally and how the trump administration might impact the markets next year. but first, one stock helping boost the dow this morning, take a look at shares of nike after results last night. we'll talk about whether or not that can offset the weakness in goldman today. back in just a moment. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade.

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nike managed to beat what was lowered expectations. the stock is trading just slightly higher. it's off the highs that we saw in the after hours yesterday. some earnings highlights here from last night, a big profit beat, seven cents. a slight sales beat. and then on the downside, inventories did go up 9%. they grew faster than overall sales. also the company reported shrinking margins. that has some concerns. the conference call completely different tone. nike executives sounded fired up. they're clearly watching their stock sink to the bottom of the dow for 2016 down 17% into yesterday's earnings report. mark parker, the ceo, fought back against the narrative that lifestyle athleisure is replacing performance athleisure and therefore adidas is beating nike. he does not name names, of course, when it comes to competition. but he did say that the competitive landscape is heating up. he said that's a good thing. it makes us better and sharper. the company also scrapped its futures orders from the release, which used to be the key for

stock reaction here. nike says doesn't really show the demand accurately anymore because it's really a look at retail orders six months down the road and nike has been growing direct-to-consumer business. we saw more double digit growth there in the quarter. now executives are saying margins will get back into expansion mode, inventories will get back in line and did stick with the guidance hence the stock getting a little bit of love just turning negative. the question is are investors going to be believers again? i think reading through some of the analyst notes this morning, guys, there's something for the bulls in this report and there's something for the bears and this is going to be a little bit of a battleground stock going into next year based on those two points. >> certainly. cramer was on the bearish stance earlier this morning in the nine talking about what he felt was a bit of a whistling past a graveyard dynamic on the call with regards to potential market share loss. >> i would say it was a little weird to hear the executives -- they were so fired up. they were so enthusiastic for 45

minutes. and then they buried the futures orders, which they said aren't very important. but north american futures orders did go negative. so there was some criticism they overlooked that and trying to positively talk up the stock and report some bad news. though they're saying that's not the accurate picture anymore to look at. >> and i just think without too much clarity on those trends in terms of futures orders and also a lot of the noise about trade and taxation and all the rest of it, this stock is still a 20 p/e priced like a long-term perpetual organic growth story that's not going to have these hiccups. if you look at a five-year -- yeah, a rough 2016, but the stock tripled for three and a half years into last year. so i think it's still in giveback mode, if you're an earnings grower over the next few years, paying 20 times earnings when you don't know how market share's going to shake out. i think that's why the stock is stuck, not why it has to go down more. >> and as we pay all this attention to 20k, the list of dow stocks since 10k, nike remains number six. >> up more than 200%.

and a lot of that, mike, has been driven on this margin expansion. the fact they've had such good innovation and sort of winning categories within the competitive landscape that they've been able to raise prices. and those average selling prices have fueled margin improvement. that's backing down a little bit and hence the competitive nature. so it's going to be on management to really live up to this promise that they can get margins back up and innovation streak back alive. the bears would say there's not a lot of catalyst when it comes to those events. >> yeah, i guess see how holiday goes and into the spring. sara, thanks. when we come back, the march toward 20,000 on the dow to help us put these moves into perspective, blackrock's russ koesterich is going to join us. look at goldman, ibm and caterpillar, biggest drags today on the dow.

watching the race for dow 20k cool off a little bit today. dow's down 11 points as we see goldman, the laggard on the index, joining us on the phone this morning is blackrock's managing director russ koesterich, head of asset allocation for blackrock's global allocation fund.

russ, good to talk to you again. good morning. >> good morning. >> how should we be thinking about the rally and any pauses in that rally like we're seeing today? >> well, i think this is a natural pause. you don't really have anything keeping the market down. it's just worth keeping in mind stocks have moved very far very fast and moved against the background of higher rates, stronger dollar and the market is generally strong. need to pause. i think at some point in the next few days or week or so we're going to break 20,000. >> why do you think that's the case? why is this not the top just below? >> well, look, you've got still a lot of market momentum. you had people come into this rally that were very understood al -- underallocated. still a reasonable amount of cash and we're in an environment where people are getting more nervous about bonds, which has not been the case for some time, that indicates to me there's a very big rotation out of bonds, to some extent out of cash by constituti

institutional investors. i don't think that's played out yet. >> russ, do you think by year end they might have the tank full? i guess there's a couple of pushes and pulls as we go into january, last three decembers finished strong then you kind of fell off the edge in january as people had some pentup selling there. on the other hand the things like the credit markets look better now than they did a year ago and technical factors seem like they're supporting this uptrend. where do you come down on how the year starts? >> we're definitely pulling forward some gains from next year. i think the gains we're seeing now will come at the expense of 2017. you know, absent some shock from china, i don't think we get off to as rough of a start. but what will happen next year is investors will very quickly turn to the new administration. and you've had a lot of this rally predicated on expectations for reflation, for deregulation. those have to start to materialize if this rally's going to continue in 2017. >> you mentioned you see more money moving from bonds to stocks, which could propel the

rally. what have you seen so far on this march up to 20k how invested are asset allocators in retail? >> i think people are still probably underallocated to the rally. let's remember we've had years and years of billions of dollars going into bonds and billions of dollars coming out of equities. so this is still probably an early reallocation into equities. but again, in order for it to continue, particularly in the u.s. we're at valuations already elevated, you need stronger earnings. to get stronger earnings you need a stronger economy. to get a stronger economy you need to see some of the reforms, some of the programs that have been discussed actually come into practice next year. >> russ, you talked about kbh commodity inflation spiking. where do you think we are on that dynamic in terms of leading to a top there? >> you know, i don't know about commodities in particular. i think the commodities have run a bit far particularly given the fact china is starting to slow down and the stimulus there is unsustainable. but underline inflation, core

inflation, what i do see is that the stickier components, health care, education, rent, they're all heading higher. that to me says inflation expectations are probably still too low and they have further room to move up next year. >> you see geopolitics being a liability of note in 2017? we're already getting headlines this morning out of reuters suggesting, you know, uncertainty as to whether putin will run again, uncertainty as to the lines of communication and their openness between russia and the united states, things like that? >> geopolitics is definitely going to be a key component next year. think about the elections in europe and france and germany, think about the uncertainty surrounding a new administration, i think the market is going to be focusing more on the geopolitical side rather than the monetary side, which really has dominated in the post crisis environment. that's going to be a very big regime shift as investors start to turn their attention to po policymakers rather than commodity side of things.

>> are risks priced in anywhere, russ, around geopolitics, around uncertainties for trade in this new administration, italian banks, you name it? it does feel like a bull market psychology right now. >> i'm going to agree with that. i'm just looking at my screen right now and i see the vix, you know shs sort of down at 11, which is close to multi-year lows. so i take that and i combine it with the fact that the s&p is trading at 21 times trailing earnings, which is, you know, close to a cyclical peak. it tells me there's not a lot of risk discounted in. if we do get a political shock, if we do get unexpected inflation of monetary tightening, i think the market is vulnerable going into next year given where volatility is. >> yeah. vix falling below 11 earlier this morning to 10.93. 52-week low there. russ, it's always good to get your take. thanks so much. russ koesterich joining us this morning talking some markets. we have some breaking news right now involving two brazilian companies and a bribery allegation.

let's head back to dom chu at headquarters for an update. >> sara, what we have right now reuters is reporting brazilian companies odebrecht and braskem are going to appear today in criminal court to enter pleas involving at least $2 billion worth of possible fines. this is a deal involving ode ii brazilian companies in an alleged bribery scheme and corruption scandal at one point linked to the petrobras scandal. we have not as many details just yet. we do know from the journal yesterday that the terms of the agreement the person said will allow for a guilty plea and will secure settlements in this dollar amount that will be paid to both the u.s. and brazilian and swiss authorities as well. so, mike, we'll probably get more as the morning progresses, but for right now those headlines involving brazil certainly catching some

attention. back over to you guys. >> all right, dom, stay on it. thanks very much. the materials sector, meanwhile, enjoying a trump rally. we were just talking about the reflation trade that remains at the center. but which stocks will continue to slide to the new year. landon has more. >> good morning, mike. materials were an average performer up about 7% since donald trump was voted into office, the sector has rallied up an additional 7% and outperforming the s&p. so which stocks are enjoying a bump from trump? steel maker new corp and pack e packaging product international paper leading the pack up. fertilizer maker cf industries up 19%. as wall street expects steels and other commodities to benefit from increased u.s. infrastructure spending and trump presidency. however, the market has not rewarded a newmont minding, shares of the gold miner has --

rallying ahead of uncertainty and fed decision to sit on rates and falling as investors sold out of gold in favor of other equities. international flavors and ball corp losing about 7% and 4% respectively. so what is ahead? well, show material stocks rally about 12% on average during the first 100 days of a presidency, guys, back over to you. >> all right. well, we'll see if that holds true, again, landon, thank you. after the break, our very own larry kudlow will be here to help us navigate through this rally and some of the economic policy we can expect ahead. "squawk on the street" will be right back. dow down 12 now, less than 40 points away from 20k.

good morning everybody. i'm sue herera and here is your cnbc news update at this hour. german authorities are searching

for the person behind this week's deadly truck attack at a berlin christmas market. u.s. intelligence officials tell nbc news the suspect is a tunisian immigrant. police have received over 500 tips, and they are urging the public to be vigilant. the death toll from a massive explosion at a popular mexico city fireworks market has now risen to 31. 72 others were injured in yesterday's blast, which sent smoke billowing into the air. investigators are still looking into that cause. and members of a boston church are really counting their blessings after receiving a generous donation. after hitting it big, the owner of a $100,000 lottery ticket called the rectory and gave it all away. and who needs a lawn mower when you have goats? washington state's department of transportation is going old school adding these four little babies to its weed warrior herd, which will help manage the state's highways this summer.

so watch out for the goats. that's the cnbc news update this hour. let's go over to jackie deangelis. jackie. >> hi there, sue. well, the department of energy out with its weekly status report on crude oil inventories. actually, a surprise build here. 2.2 million barrels. we were looking at the api last night a draw of 4 million, the market was very cautious this morning not really sure what to expect today. and you can see prices were trading higher this morning. they turned negative on this report. the dollar index is going to continue to be a headwind here, so you really need to watch that very closely. and while we're seeing some support in this trade, and we did roll from january to february yesterday, so the prices were a little bit higher, there still is some downside potential here. a report like this could move the market. a couple of things to watch even though the confidence is there that the opec cuts are going to take shape in the beginning of the year, but the crude oil trade is expected to be choppy and watching dow 20,000 as well this could impact crude too, they sort of work hand in hand. back to you at post nine.

>> jackie, thank you very much for that. we knew inventory numbers would be important. meantime, the dow continues to flirt with 20,000 this morning in a tight range once again for a second day, although we did set new highs yesterday for the first time in about a week. joining us at post nine this morning for his take on the rally and how the trump white house could impact the markets next year is our senior contributor larry kudlow. >> thank you, carl, everybody. >> i'm going to use every chance i see you to ask what the latest is regarding your involvement in any transition or administration? >> well, what can i say? first of all, i'm grateful to be in the mix. i'm very grateful for that. i'm honored to be in the mix. and had some pretty good support outside. i'm very grateful for that. i don't have anything new news to report, but people have been very kind. like i say, i'm honored. >> all right. what do you make of where we are right now? the chi ron at the bottom of your screen which not many people might have been expecting in early november. >> well, you know, it's interesting to me there's a lot

of growth inferences here. if you look at the numbers. that's what's so interesting. and it's been a change, i think, since the election. maybe a see change. the dollar's going up, it's a real exchange rate. another growth indicator. here's one a little in the grass but not bad. corporate bonds, okay, investment grade vwa corporate bond yields actually the spread against risk free treasuries is narrowing during this whole period of rising rates. i think that's a growth orientation. so i'm not a timing guy. you guys know more about the day-to-day than i do, i think we're going to cross 20,000. i think we're in a bull market situation. i know there are going to be sizable corrections along the way. that's a good opening. >> is the hope of stronger and more sustainable economic growth going to be backed up actually by policy? do you think these expectations are realistic? >> i do.

i do. now, that doesn't mean every nickel and dime and there's going to be big legislative strategy issues which comes first, business tax cuts, obamacare, repeal or rewrite or whatever, dodd/frank. energy i thought president obama's ban on offshore drilling was just the silliest darn thing i've ever seen. it's going to be overturned. it's going to give trump make him look like a hero. i don't know why obama did that. but whatever. it's so interesting to me, ray dalio is on the tape, i think yesterday -- >> talked a lot about his blog yesterday. >> yes. and ray is an old friend. he's a very brilliant guy and runs a great job at bridgewater. it is really true that this is a group that is pro business. the war against business that i have talked about for the last bunch of years is over. it's over. profits are not a dirty word. and i think that's terribly important. not only in terms of the specifics for lower business tax rates and individual tax rates,

but just the general attitude. even in terms of stats, look at these consumer and business confidence numbers, even small business confidence numbers. so this has a kind of c change, referred to as a reagan thatch er. >> you talk about the markets make this leap to price in growth or maybe inflation or reduced inflation risk, whatever you want to talk about it across the world really after the election. >> yes. >> what's interesting is it's hard to necessarily say specifically in policy wise for example is the deficit going to swing a certain amount? are we going to get stimulus directed in certain ways? it's very tone from the top is one thing, but what about in practice when you have some deficit hawks mixed in with some folks who say let's just slash tax rates? >> well, that's not bad. i mean, you know, there's room

for deficit hawks. i'm a growth guy, i'm a low tax rate guy. i think they should be cognizant. you're going to get a bill of sweeping reforms. there is no question about that. you got a new man in the white house, republican senate, republican house. there's a legislative strategy issue, which comes first, obamacare repeal or business tax reform or maybe the whole tax cut package? i don't know the answer to that. obamacare repeal rolls back a lot of taxes, by the way, on investment and business. so that's a plus. i happen to think single most important growth propellant would be the business tax cuts for large and small down from, you know, 35 to 40 to let's say 15 to 20. that is just to coin a phrase, that is huge. that is really huge. america's going to become for the first time in many, many years investment destination for world capital. we should begin to win again the

global race for capital. i believe unfortunately the obama group did not understand the importance of capital or investment or profits. this group does. and they will work well with the house. i mean, it's also interesting for better or worse, maybe it's going to be an experiment. you've got a lot of people in business in this cabinet. you really do. i mean, the wilbur ross and steve mnuchin and rex tillerson and so forth, that is a big change. think about that. we could not even in the w. bush days we would not have said this going back maybe even some extent more than reagan, this is a group of business people who will reward success, not bad mouth it and penalize it. that's a sea change. now, people who disagree with me, i understand, let's be civil. but i'll just say this, this is an experiment worth having in my judgment. >> sure. i've seen some charts, philly fed had a nice chart on cap expectations. >> yes. >> others argue cap utilization

there has to be a lot of demand to make up that slack before we truly see new infrastructure being built. which is right? >> i think you need the demand. i think everybody knows we need infrastructure. particularly business related infrastructure. which will be paid for by private industry, not the u.s. government. but i think, you know, jean baptiste say france's greatest philosopher 1804 i was there when the book was finally published -- that was a joke, he argues supply creates its own demands. in other words, if you have the incentives and rewards to take a five to ten-year risk, you will do it. we have not had that, and it's not just obama. we have not had this for 16 years. people have not made the five to ten or 15 years, this has to come, it's an infrastructure creator. it improves the efficiency of the economy, the capacity of the economy and provides incentives for work. we just haven't had this experiment. in my book jfk the democrat did

it, ronald reagan republican did it, it looks like the trump group's going to do it. by the way, for christmas shopping folks has great pictures jfk and the reagan revolution, you'll love it. fast read. sara has read it. she's committed it to memory. >> on the beach reading. >> scentennial birth -- >> shameless plug. >> i'm saying, look, i know there's disagreement. these are controversial policies. i think it's time for america to take that kind of risk because i don't believe in the new normal. i believe that this country can grow at 4% a year for just about ever. and we'll get a big kick from this. it's worth a try. that's all i'm saying. it's worth a try. >> one point that we do have to ask about and i know we've talked a lot about the trade issue, larry, but a lot of people are encouraged by the prospect of you being in the white house because they see you as a proponent of free trade, and we are learning that wilbur ross is going to take the lead on this as potential commerce secretary. so where are you in terms of what we can expect from this administration? and what companies like nike and

like fed ex which we're asked about it on conference calls last night, can expect? >> well, let me make one thing clear. i'm here at cnbc doing what i love to do. okay. just want to start with that. regarding wilbur ross, who is a dear friend, he and hillary and others, look, i think mr. trump -- this is just me speaking. just me. i think the president-elect would only use tariffs as a very last resort for better deal making and enforcement. okay. that's especially focused on china. i do not think he wants a quick trigger on tariffs at all. we need to make better deals. we need to have equality across border adjustments with respect to taxes. we need to stop china, which is heaping on regulations and barriers and taxes to our trade. china is in a lot of trouble on this. wilbur ross is not a reflexive protectionist guy. he's a global guy. he understands the economy, as does mr. trump, who his own

private business has traded across borders. i don't believe the tariff thing's going to come. i think you're going to see renegotiation, better deals. by the way, deals that can be enforced by american interests, not these sort of i call them world international trade courts and whoever they are, every little country has one vote. no, we can't do that anymore. but i think the trade protectionist argument, i know it's out there, i know it's a threat, i don't think it's a serious issue right now. i really don't. >> we're going to keep you honest on that, larry. >> i know. >> and on any news you might break. >> and you know, i've always called them as i see them in this campaign. i really have. >> yes. >> it's good to see you. >> happy, merry, holy, whatever it is. you guys have been great to me this year, i appreciate it. >> larry kudlow. when we come back, rise of autonomous cars, we'll get that playbook. and coming up nobel laureate bob shiller, his take on the dow's march to 20,000. we'll be right back.

the nasdaq is also near record highs. on the top of the list there, monster beverage. shares are up more than 3% on a jeffries upgrade, potential buyout target there for coca-cola. a lot of speculation continues about that. it's also a domestic player so it's insulated from the strong dollar and any trade tensions. much more "squawk on the street" when we come right back. mobility is very important to me. that's why i use e*trade mobile. it's on all my mobile devices, so it suits my mobile lifestyle. and it keeps my investments fully mobile... even when i'm on the move. sign up at etrade.com and get up to six hundred dollars.

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let's get to the cme group this morning, check in with rick santelli and get "the santelli exchange". >> thank you, carl. i would like to welcome an dy johnson. andy, thank you for taking the time. so many things going on trying to explain big moves in the market since the election, but my e-mails lately have been filled with stories about calpers, you know, big pension holders trying to make good investments to pay people like firemen and teachers and various entities throughout various states, those are in california primarily. the relationship of wall street and brokerage and the markets is

integral into the middle class, is it not? >> ochbl. and you make a great point. many of my clients are those very type of clients. look, they have a difficult job. they're hitting returns pretty high in a market where we recently had ten-year at 1.35%. that's really hard to do. >> so basically the point of most of the e-mails is they have very unrealistic goals. there used to be 7.75, 7.50, they keep lowering to be realistic. for the first time ever benefits are going to get trimmed. the reason i'm saying this i think to understand the markets one needs to understand the difference between retro active and radioactive. a retro active relationship is going to move more -- maybe a lot of these policies trump is going to have will take effect in the rearview mirror. you see where i'm going with this? >> i can see where you're going and that is quite possible. look, it is possible given the potential for higher growth that we could be going back to say 2014 type levels, at least in fixed income. where spreads were a lot lower,

yields were actually higher, the economy was -- we thought we were about to blast off. we thought we were going to a much greater level of growth. and if that does in fact become true, then it's retroactive in some sense. >> let's speak of another relationship that sometimes >> let's speak to another relationship that gets misguided or misinterpreted and that's the fix income market. rates are going up. it isn't a death nail for lesser credits like corporate high yield, leveraged loans. >> you're absolutely right. for example, 10 year is up 70 basis points. almost .75% since the election. high yield spreads are narrow about that much. so high yield the return has been positive since the election. >> overperforming. so when you see rates go up, it doesn't mean all of the other fixed income rate sectors are radioactive. andy, thanks for being here. back to you. >> rick, thank you. watching shares of fedex after earnings down more than 2% on a mixed report.

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take a look at fedex this morning weighing on the dow transports pulling back 2.5%

taking the stock back to where it was trading three weeks ago. basically the story is a miss on the bottom line pretty soundly about on target in terms of revenue and also reaffirmed next fiscal year's guidance but there's a little bit of sense of margin squeeze out there because fedex is investigating so heavily to keep up with surging demand from e-commerce customers and tough talk from fedex telling retailers they're going to demand higher prices and stop doing business with some of them. it seems like there's as bottleneck here in the shipping system. the stock, of course, was not priced for any disappointment. you had 30% year-to-date gain. obviously analysts are out there this morning for most of the street defending the stock saying the long-term story is in place and ceo fred smith said we're investigating for growth and only reason we make heavy investments is because we fully expect demand to be profitable down the road. >> he talked about some of the

issues we talk about in terms of the politics and the various policies we're expecting. my favorite quote, the prospect of significantly reducing trade is in our opinion significantly dangerous. fred smith on that fedex call. as we head to break, look at the s&p sector heat map. the dow is down about 18 points right now pulling back away from the 20,000 level. you can see it is a tale of sectors. energy the best performer. health care is lagging. happening here? hey nicole, this is my new alert system for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh. alerts on anything at all? not only that, you can act on that opportunity with just one tap right from the alert. wow, i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade.

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as 2016 draws to a close, msn cnbc is breaking out the playbooks looking at ways to make money this year. we're hitting the ride with autos. here phil lebeau. >> buckle up and get ready for the auto industry to hit the gas on new technology in the next year. that will drive three big stories behind the wheel in 2017. first, new autonomous drive systems will mean more of us taking our hands off the wheel. tesla, gm and other automakers will roll out features next year where more cars will do the driving for short periods of time but automakers will stress drivers remain in control. a fully autonomous drive car still years from seeing that expand beyond limited testing. second, in 2017, we'll find out if america embraces lower priced elect cars. the chevy bolt with range over

200 miles will be sold all of next year starting on the west coast. meanwhile, tesla's model 3 is scheduled to be delivered late in 2017. let's see if there are strong sales for two models priced under $40,000. third, america's love affair with trucks and suvs will stay red hot in 2017. right now almost 60% of the vehicles sold are trucks and suvs. that will continue next year especially if gas prices stay in check. if the economy remains strong, we could see record auto sales next year. right now the look is for auto sales to potentially top 17 million vehicles again. that would be the third straight year that that happened. back to you. >> phil lebeau, thank you very much for the outlook. with the dow taking a pause here from its record setting rally, we'll send it to you, carl, for "squawk alley." >> good morning.

it's 8:00 a.m. at twitter headquarters out west and 11:00 a.m. on wall street and "squawk alley" is live. ♪ good wednesday morning. welcome to "squawk alley." our top story this morning once again, dow 20k farther away this morning as we're back to 19,950. joining us to talk about the rally at large, valuation and sentiment, robert shiller is the professor of economics at ye