everyone gets a trophy. or a ribbon. or a medal. >> you can have fifth place in monopoly if you finish last. >> of five people. >> it worked for the millennials because we certainly don't want to trigger everyone. >> we're all winners today. i think that's what we can take away from this. >> and one more day before christmas break, make sure you join us tomorrow, "squawk on the street" is next. ♪ good morning and welcome to "squawk on the street." i'm david faber along with jim cramer. we are live from the new york stock exchange. carl quintanilla has the day off. let's give you a look at futures right now as we head into the trading session, a half hour from now. not much, not much going on there. european markets you ask about and i will answer. and will i get -- no, i didn't get spain and italy. come on, guys. all right. but there it is. you can see we are down ever so

slightly in the european markets for this thursday morning. the ten-year note yield crossed that 2.5% level and now 2.572 is where we find ourselves with wti firmly above $50 a barrel as well. let's get to our road map this morning. and it starts with the markets. of course we are still on 20,000 watch for the dow. lots of data as well to digest this morning. and in president-elect donald trump's meeting with defense ceos, what did boeing and lockheed say? and what are they saying now? and two more names familiar to the cnbc audience named to trump's team, carl icahn and peter navarro both set to join as advisors to the president-elect. the economy grew faster in the third quarter than the government originally thought. the final reading up 3.5%, that is the fastest pace in two years, better than the previous estimate of 3.2% growth. the data comes as the dow continues of course to take aim

at 20,000, jim, we've been ever so close. i've been monitoring it from my few days off, but we didn't quite get there. i'm sure they have the hats ready. what do you make of where we stand in the markets? >> okay. i think that we've been stalled for the last couple days, but the momentum's been incredible and rotation has been amazing. yesterday we lacked a leader frankly. we didn't have anyone we could do blocking or tackling to follow. i would tell you this, david, today is a very important test because we've got very strong macro, which is that gross domestic product number. and then we have a company that i reported a number that was so strong that it could be an umbrella to lift a lot of other companies, which is micron. micron's cymbal, mu, you'll see it underneath us in the crawl running up big. it's been going up big literally since the moment it reported. the quarter so much better than anyone expected. and that could be a readthrough for so many different tech companies that you get good gdp number, good tech number, it does combine to be able to create an atmosphere where you

can take out dow 20,000. >> it does? >> yes, it does. >> let's talk briefly about mu given that kind of moment happened not very long ago, drams looking favorable for 2017, looking quickly at a couple rapid notes that have come out. but generally very positive. >> the conference call is really funny because this is a company that when it gets it right, it gets it incredibly right. i'm not saying this is going to be the '94 cycle where it went from 8 to 47 over a period of a year or where it went from 20 to 99, but this is one of those moments where they can't -- where supply has been greatly exceeded by demand for both their disk drive business -- i mean, for their dram business, good readthrough to disk drives why western digital is going up, and their ram business, literally what's happened is they can't build the equipment fast enough. it's fantastic for semiconductor equipment companies, particularly for applied materials and make a good read

in general for the group which would be lam research. what you end up is automobile, mobile, all strong, takes the whole complex up. conference call -- i'm not saying that drip with contempt because i love the ceo so much, but analysts were so far behind the curve in terms of realizing how much demand there is for internet of things products and how little supply there is. these aren't like the '94 cycle or the 2000 cycle. you can put a greenfield dram plant in six months back in '94. not anymore. this is going to go longer, and it's going to go louder than people think. >> it's funny we think about themes of course. internet of things you and i discuss it a lot here, typically i'm sitting on that side of you, but it's the same discussion talk about the growth and who's going to benefit from that. >> right. >> nvidia's a name you bring up -- >> oh, the triple crown winner. >> the gaming chips seemingly have all sorts of uses perhaps they weren't fully aware of for

this internet of things we talk of where everything's going to be connected, sending off reams of data then going to allow the end user to optimize, function in a lot of ways and help for future -- >> so well put. >> -- future intelligence really for these things. >> right. it's machine learning. this is artificial intelligence. there's a guy i follow, we talked to him during the salesforce period with twitter, afshar, he is the guy i use, literally he posts on twitter the most important things you can learn about all about machine learning. if anyone wants to realize the reach of this and then they will realize why you can buy micron at 23 and not be concerned because the data, the data of a driverless car -- david, i had a data form real estate trust on recently -- the data required to deliver product same da, the data required for driverless car, there's just not enough warehouses in this country to handle all the machines and

what's in those machines when you smash them open? micron parts. >> right. the key to intelligence to learning is of course data. massing more and more data. if you're in autonomous cars, it's the miles driven for the car that are the key to it. that's why google may be ahead of others in terms of collecting data and understanding every single situation and instance that occurs and therefore the car will know how to react. >> absolutely. analog device -- >> this is just the earliest days of this world we're disc s discussing. >> let me give you discussion behind the scenes, analogs behind a.i. -- made a connection to this ability like a radar system for cars. the guy was -- the ceo was terrific saying, listen, when we get these chips they're going to be able to detect things, know what's ahead of you, that's going to cost thousands of dollars. >> he goes, no, it's going to cost $100. technology is coming down in price. reminds me so much of mainframe going down to pc. what's happening is it's

happening not just because the technology's getting better, but the technology is getting rapidly cheaper. so a car you might think would cost $200,000 to be driverless will cost just a couple thousand more than one that isn't. and that is the big -- that's the big change. thank you so much for all that information. >> just wait until the robots know everything. >> well -- >> do everything. >> analog devices has robot technology that will take the place, again, of a lot of people. >> of workers. there's a huge story there. not time for us to go into in terms of what's going to happen in automation, not just here in this country but around the world. around the world for all the people who sew things, for example. >> well, remember, the led -- prenafta that was one of the largest single categories of workforce in our country. >> not here but around the world, still is, hundreds of millions. >> yeah. now, when i go into what's the most recent technology that i keep coming that everybody's

doing, it's the ability to be able to scan this, okay, and not have to use checkers. we know that's 3.5 million people. >> cashiers, correct. >> and nice guys who have a system to be able to make it right now so you can walk out, they say, listen, those people will be better shopping advisors. that's a nice thought, but when i shop, i don't want any advice. i know exactly what she tells me to get. i can't deviate from what she tells me. >> understood. >> i don't want advice just going to conflict with the advice i've already gotten from the boss. >> from her, yes. >> so i don't need advisors, i have one. >> from she who shall not be named does not watch. >> no, right know she's with her daughter and said knock yourself out you're with faber and enjoy yourself. >> all right. i love her too. let's move onto president-elect trump. he met with the ceos of boeing and lockheed martin yesterday after calling programs for boeing's new air force one jet and lockheed's f-35 too

expensive. at trump's resort in florida where the meetings took place, boeing ceo said he's committed to building the new air force one for less than $4 billion. lockheed martin -- >> done for less than that, and we're committed to working together to make sure that happens. and i was able to give the president-elect my personal commitment on behalf of the boeing company this is a business that's important to us. we work on air force one because it's important to our country. and we're going to make sure he gets the best capability and that it's done affordably. >> lockheed martin ceo issued a statement calling her meeting with the president-elect productive adding, quote, the f-35 is a critical program to our national security. and i conveyed our continued commitment to delivering an affordable aircraft to our u.s. military and to our allies. you know, jim, that $4 billion number was what the president-elect used in the tweet, never got any confirmation the number was actually $4 billion.

>> you're a stickler, i know, that's one of the hardest things about working with you. >> yeah. well, i wanted to know what the actual cost is. >> demand of facts is so old world. you're like the gutenberg bible -- >> it changed the world -- >> let me tell you how old fashioned i am though to completely date myself. when he worked out of the building, cutting numbers, boeing. no, no one's beginning to do that. we're in a new era. if she had to charge the government less for the f-35, she'd have to eat that. it would come out of her gross margins, right? >> yes. >> but no one cares right now. he's saying to both hewson a and -- lower your gross margins. analysts are not ready to go that deep and say he means business and that means we have to be more circumspect, but i

wouldn't be surprised given the detailed nature of the people he's appointing around him someone doesn't say, you know, i saw your gross margins, they're too high. >> this is a man who deals with contractors all the time. >> exactly right. exactly. >> and if you speak to them or know about the history, it is a lot of back and forth, and a lot of pounding down on cost. >> that concrete -- >> that is something costs too much. >> this one is what i've heard, hey, you know what, i'll pay you what you wanted, but i'll never recommend you again. or i'll pay a lot less, but i'll tell everybody you were great. >> wow. >> that's one i've heard many times. >> from him? >> yes. it works. and apparently it works. as a vendor that's what you're left with, either i'll do it and i'll take a lot less than i thought i was going to. and he's going to recommend me. >> right. >> or i'll get paid in full but never work for him again. >> that's the deal he offered greg hayes from united technologies. remember what he did people forget the corollary. greg hayes agreed to keep some

of those workers from going to mexico, and at the same time in the beginning of the press conference trump said people should use carrier. >> right. >> now, you know what, when he's meeting with people, he may actually -- who have a choice at building a factory, he may say, listen, you ought to use carrier. >> it's going to be an interesting dichotomy between the populism on one side and the support of corporate america strongly and dereg on the other and where we're going to come out and extends to m&a, an area i know well too, where a lot of people think, well, kbar the dor there's not going to be anything in terms of regulation, at the same time you may have a president who chooses to cite specific transactions where there may be csignificant job losses and says, no. we don't know. >> peter navarro are getting picked -- now they're getting picked off cnbc. it's like who -- peter navarro is on constantly. the cnbc shadow cabinet is

almost as big as the goldman shadow cabinet guy. peter is a guy who stands for bashing the chinese. trump has a lot of titles now. like chief china basher. >> and carl icahn is special advisor on regulatory reform. >> why aren't these people czars? they should be czars. >> right, ebola czar? >> right. that lasted for a couple days. so we make navarro sdczar, you could say he stands for tariffs. so if you're a nike, you look and say, well, navarro's not really the guy we want in there. we're free traders. i'm saying we should be a little more -- we're not seeing any of the downside yet. wow, navarro, that could be bad for business with china, but that's what it is. >> what about apple? >> apple makes a lot of products in china. >> they do? >> some people feel that makes them more immune. >> less susceptible to the chinese trying to exact some sort of retribution if we -- >> right. i keep hearing that to be the

deciding point. how many people have you hired in china can immunize. they don't want you flooding the zone with your goods unless they're made there. >> speaking of china, we're going to talk about alibaba by the way when we come back. defending itself after the u.s. put one of the company's units on its blacklist for counterfeiting. another look at futures here. of course we're looking for that dow 20,000. and, well, we may get it. we're also keeping a close eye on europe. more "squawk on the street" live from post nine at the nyse.

the u.s. has put a unit of china's online market alibaba back on the notorious blacklist. the platform one of the key platforms alibaba has one of its shopping websites not doing enough to police the sale of counterfeit goods and violations of intellectual property rights. alibaba president michael evans saying the company very disappointed adding the ustr's decision leads us to question whether the ustr acted based on the actual facts or influenced

by the current political climate. interesting statement there. of course the obama administration's ustr is still in charge. >> right. >> they seem to be getting ahead of it at alibaba claiming of course that they've done an enormous amount to police counterfeiting on the platform. tmal is the big brands, tabau is smaller retailers, almost you sort of do it from your home to somebody else and you run your business that way. >> can you walk me through? does this mean you might be buying something say a branded company product and it turns out to be branded but a knockoff? >> yes. >> so i buy a coach bag, like off canal street, they have coach bags for $10 and $15 and i'm always marveling at how inexpensive they are. >> yes, the same thing. that rolex watch you're buying -- >> my father had a collection of 2,000 watches when he passed. >> did he? >> yes. most marvel one from 134 --

canal street. not too far. but if you buy a phillippe patac is that how you pronounce it? i don't know, i wear an apple watch. >> i'm aware. >> they don't have any way to verify or endorse it? this seems like -- our government is saying they t-- >> you and i have talked to j joe -- removing best it can anything it believes is a counterfeit item. but apparently they're not doing a good enough job, at least according to the ustr. it is interesting to me, jim, based on our previous conversation prior to the break they would bring in the current political climate in their statement. you just have to wonder with peter navarro advising on china

with so many other things that clearly are articulating a very different approach to china from the incoming administration. >> yes. >> what things are going to be like, whether it is for an alibaba or an apple to your previous point about having a lot of employment over the country, or nike, so many. this has to be a key consideration. >> that's why i've been calling it a risk factor. listen, here's a new risk factor you have to think. for instance, alphabet doesn't have that risk factor, they don't do business in china. you should give that a higher premium than a company that does a tremendous amount of china but doesn't make it there. a proctor & gamble, we got another downgrade on proctor, nothing in it about china. but i would say that's a very big risk. they have a very big business in china. david, let me ask you because you know amazon better than anyone. what does amazon do to police? >> a lot. >> they do? >> yeah, a good amount. they try to verify all of their sellers. it's not as though there aren't people who conceivably have

nefarious intent on any of these platforms. e-bay also dealt with it for many years and continues to as well. but amazon's a bit different. >> okay. one thing people should remember these are people he's picking. we have to go to break, they believe we've been in a war with china, trade war, for a long time, just been losing. they're not trying to start one, they think we've been in one. >> and alibaba has millions of sellers. more akin to e-bay than amazon. let's take a quick break when we come back jim's going to have mad dash as we countdown to the opening bell. here's another look at futures. more "squawk on the street" right after this.

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♪ six minutes before the opening bell. time for a mad dash. where are we headed? >> a lot of people have been waiting for a turn at bed, bath & beyond. that's because bed, bath & beyond bought a big step up from their usual offerings. last night they reported and basically saying, listen, it's an investment year, we're going to get this right. they've got a huge, huge complex opening in brooklyn in sunset park. i think it could be a game changer when people start realizing how impressive all the new bed, bath has been doing. the analysts are turning on it. here's a classic, raymond james goes to market perform from buy just saying, okay, enough is enough. we can only be patient for so long. david, i think they're losing patience at the wrong time. i do believe that this p mall they bought which is personalization mall will impact

in a positive way, but these guys basically are kind of like saying, hey, listen, we're going to get it when we get it so give me a break. >> this stock has been biding time for a long time. >> amazon has hurt its core business. >> you've talked often, they bought back a lot of stock. a creeping lbo, you had thought for awhile, gee, wouldn't it be interesting. i guess that's been off the table for a bit now. >> well, what happens is they decided to spend, invest to fight amazon and a lot of people feel is what happened is the train left the station. i have to tell you, david, i think one king's lane is very impress skpif what they can do with this personalized mall, it's called p mall, really blow things out. but let's see the new -- in january you and i will go to sunset park and check it out. >> okay. we have a big, big couple days of retail ahead of us, you and me. a lot of revolving doors. opening bell a few minutes away. stay with us.

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always discreet for bladder leaks you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell going to ring in about a minute and a half on this thursday. things are certainly getting

quieter this week. next week, jim, going to be a quiet week. many vacations coming for many people including yourself. well deserved. but what can we expect to see during the course of today? and what as i often like to ask you in carl's absence is the key to this market? >> i'm glad you asked, it's microsoft. a very important piece came out today by morgan stanley talking about linkedin raises numbers. when you see western digital go up and micron go up, you say how far can this extend? well, if it extends to microsoft, then microsoft can be a big enough factor in this endless pursuit of dow 20,000 that it might be the one that breaks the log jam. of course we know that dow 20,000 doesn't really matter. >> right. >> but you needed a leader. yesterday, we thought nike would get us there, nike isn't big enough, microsoft can do it. >> microsoft can do it? >> yeah. microsoft can do it. >> goldman sachs certainly has

done its part. >> goldman's been asked to do too much for its country and for the dow. >> you hear the applause building behind us, of course as we get ready to ring the opening bell here take a look at the p s&p, how we match up green versus red, here at the big board catch a lift fund helping wounded veterans with physical limitation. at the nasdaq the new york foundling, both very worthwhile organizations this morning at both exchanges. all right, you mentioned microsoft is the key to this market. i mentioned goldman sachs. let's start on financials. just continue to have this run that is one for the ages in some ways, at least if you were smart enough to have bought them on the day you found out donald trump would be president. >> goldman sachs up 30 and j.p. morgan is one i think we haven't talked enough about frankly because j.p. morgan deregulation's great, j.p. morgan, david, let's just

understand that when you -- if you get four rate hikes, which is what -- steve liesman and auto guys say would be four rate hikes, that's $3 billion to the bottom line. $3 billion, for doing nothing. right? just for being in the banking business. and that is called unbelievable gross margin expansion. they don't have to hire more people to get that $3 billion. so think of the leverage of that bank if you have deregulation, they can return capital without the government necessarily meddling. they can do more loaning. and the fact is that the stock sells at 14 times earnings. so for those of you say this whole thing is chimerical, the markets move too much, i urge you to think about all the ramifications of what could happen to the world's largest bank and how important it would be. >> it is interesting when you think about many of the changes that were created as a result of dodd/frank and other reasons in terms of compensation, jim, and so much of compensation now

takes the form of equity as opposed to cash. >> right. >> and they leg into it over usually what are five-year periods. >> right, to keep them in. >> if you have been waiting or you are legging into some stock this year, you are very happy if you are at any of the big financial institutions, whether it's goldman or morgan stanley or j.p. morgan or citi. you can go on through the big names of course. whoa, these guys are going to make a fortune. >> yet not yet reflected in the highest end new york real estate, which peaked according to toll brothers, which is not the upper -- you know, they have high echelon. >> they're high echelon, but the biggest guys, whether it's the russian oligarch or -- >> that market not controlled domestic, it's controlled by international. >> right. >> so i think people want to correlate those two, recognize that the retreat of the oligarchs is more important -- >> to the very highest end. but if you're in the market for just a $4 million house in the hamptons, that's probably the market we're talking about. >> that's the lower end market.

>> a banker watches their j.p. morgan shares that -- yeah, by the way, we are coming to comp season and bonus season pretty soon too. >> i've got to tell you when people look at the compensation, i keep thinking about what you talked about how the return on equity we never thought would ever get back to the old days. >> we did not foresee -- >> we did not foresee a trump presidency where one of the principle things that they want to undercut is the ability for a firm to be able to use its own capital, be able to generate higher returns, which is exactly what goldman used to do. which is why goldman's the best performer. >> that is a good point. goldman did to its credit pivot effectively also as the world changed goldman changed. and they have certainly shown through the years their ability to do that as an institution probably one of their key strengths. >> yes, but there was like no place to run after dodd/frank. and now there will be. at the arbitrage desk that bob

rubin ran when i worked there that was phenomenal generator of profit, but you really can't position like that for your own company now. but they will be if you listen to some of the deregulation -- >> meanwhile, 3.5% gdp, that's not a bad number. i mean, all you heard about was 2%, 2%, we're stuck at 2%. >> it really is incredible how unfortunately inarticulate the obama administration has been, i think, at taking claim. >> right. >> and i think one of the reasons why is because they feel as long as there are so many people who are disadvantaged, not making a lot of money, what good does it do to say we have great gdp because the people left behind you're rubbing it in their faces. and that is a real issue. look, 3.5% gdp but still wage growth of nil. on 3.5 gdp but still don't have the business formation. so i understand the rock and hard place obama's found himself in which is we want to go trump how great gdp is how great is that for the person who just got laid off for machine technology? so it is a difficult position

for the president to be able to claim that things are better when not everybody wants to do better -- >> right. but you and i often talk about the trends themselves and that in fact does point to more challenges when it comes to jobs. >> yes. >> the longer term trends. not sure -- typically when you hear applause build here it's typically a member of the military, somebody in uniform. not clear who's entered. that is often why you hear applause. disabled veterans. disabled veterans. of course we hcertainly worthy our applause when they come in. >> paychex, small to medium size payroll, looking better. small to medium guys. can we take a break? i want to do the right thing. >> yeah. interesting having just been to washington, d.c. and visited the

memorials we have, of course, the second world war, from vietnam, not enough time. >> do the right thing. >> yeah. people who give so much to this country. [ applause ] and back to business we go. this morning you talked a bit about technology, mu, let's take another look at those shares, jim, because they are going to be as you pointed out the star performer this morning in many ways. given the numbers from the company. >> you know, they're going to -- [ cheers and applause ] >> you know what -- >> let's listen. >> yeah, deserving of our

applause. [ applause ] >> real life. >> when i look at what's going on, it's not enough to -- i mentioned that the microsoft spillover went so far not doing its job. >> right. >> i mean, endless horse race to try to figure out which skill players are going to take the dow to 20,000. i find myself thinking, well, that one right now that one it's like handicapping for fantasy football. oh, geez, that one -- i don't know if that one's playing. you have to check shafter to see if dupont's going to do it. you've missed the last couple days. >> yes, i did. >> but yesterday when oil inventories came out they were better than people thought in terms of being good for oil, but chevron and exxon ticked down today and it's like, all right, that takes care of that.

no special tonight. no special tonight. like who's screwing up today? get easterbrook on the phone, tell him to go preannounce better than expected mcdonald's numbers because that's a $123 stock. >> somebody just do something so we can get it over with. >> how about monte dei paschi. >> how about it? >> the oldest bank of the world, looks like it's going to collapse. easy come, easy go, right? >> although there are some who believe europe and the banks actually are going to have a nice move next year -- >> i think they are. >> -- in terms of the ability of the european economy to recover a bit and recapitalization you discussed it's actually going to happen. >> italy has very poor gdp growth. a lot of people feel the workforce is not economic, a lot of people feel chinese exports, not true, northern part of italy is tremendous manufacturing and very good. they don't have a banking system in italy. i can tell you that firsthand. they do not have a banking system that functions.

if you get unicredit, second largest, $13 billion recap, you get some banking going on there, that country's going to do better. the pensioners who bought the monte dei paschi there was 5 billion euros done last couple years, they could be hung out to dry. that will bring a strain of nationalism upon italy beyond even what we saw in the most recent election. so you've got two things in play, you've got the possibility of more nationalistic streak developing in italy because of the losses and you have the potential for reignition of their actual growth because of a banking system. you know there's no real mortgage market in italy? >> you have told me. you are well -- you have become a student of the italian mortgage market. >> yes. >> and banking system. >> and monte dei paschi is an excellent bank and they speak english there, which is helpful. i don't mean that to be -- i'm saying they have a very big office in new york. but what has bothered me about that banking system is it's just -- it's a cash system. that country's way too much into a cash economy. >> right. >> and maybe these recaps will make it so it's much more bought

into the rest of the europe. >> the modern age, what you seem to be saying. >> in the world -- did want to get to m&a briefly. stock is up this morning after j&j comes out yesterday and says we're back in, exclusive conversations with the swiss rare drug company. not clear to me. not enough people answering and/or returning phone calls from me this morning to give you great insight there. sanofi of course had been there and i reported -- the last thing i reported was a deal was not imminent. and certainly is not imminent for them. but j&j coming back like this one would assume you're going to get something fairly soon given they came very close to getting a deal done originally before j&j walked away. the fact that they're back in inclusive talks would indicate you're going to get something in the near-term, whether that is before or after the new year i can't tell you. >> now, did you in your

reporting detect there was no scorched earth when j&j walked away? >> no. there was anticipation on the part of sanofi's advisors that there was, perhaps a hope on their part that there was. and typically when you do see a company like a j&j publicly announce it's no longer involved, it is rare to see them choose to reengage and certainly so quickly. >> i'm glad you said that because i was shocked. i thought it was a typo, literally. because i had gone through and followed j&j closely and while they're a high road firm, okay. i felt that the dismissal was based on the fact that these guys were unrealistic and j&j was realistic which therefore let me think that it was just cut and dry never going to happen. so obviously alex gorski, ceo of j&j, more of an olive branch behind scenes than we would normally think. >> remember that -- right. so it does happen. companies withdraw and come back and reengage. usually the second time wins.

so we'll see whether that is the case. >> hey, i just mentioned the spirit of google, alex gorsky, went to west point, in terms of ceos who are committed to doing charity during and making -- and asking others to help, which i think is really important, alex gorsky. >> not seeing a lot of movement by the way in the part of lockheed martin or boeing. in fact, boeing's shares are up, not that they wouldn't be. >> right. >> as a result of the meeting yesterday with the ceos of both companies and president-elect trump, jim. >> one thing that you've been missing, david, is the excitement in the oil patch of companies still issuing stock and buying more. now, here's an odd one, anadarko actually selling marseilles share assets. i see natural gas tightening all over the country. it's interesting if they're going the other way. i expect more in the next few

weeks. >> in the next few week sns. >> the -- >> not big mergers. >> no, assets for sale. but there's lots of assets for sale and the market is so -- every one of these deals works. gpor, a company i'm not really that big fan of, gulfport energy, they did a deal to work. stock's at 101, they bought some assets, that worked. so keep seeing that happening. that's that reliquefy kags. they're using equity markets with ease to raise as much money as they want. >> that is one of the better things about our system and our capital markets, isn't it? that we are able to sustain these companies and they're able to sustain themselves through difficult times without -- there haven't been certainly that many public bankruptcies. there have been plenty of bankruptcies of smaller service providers that we never talk about. >> right. >> but the big guys were

relevant. >> the pioneers, my hat is off to pioneer. they did -- they went from being a very good independent to being the colossal of independence. these are great growth stocks. >> permian guys, right? >> permian guys. all right, let's get to bob pisani who has more for us this morning on what's moving, bob. >> we're going in the wrong direction here. we're talking about a dow 20,000 thing and it's not happening right now because there's a complete lack of leadership in the last five days. this has been an ongoing trend. let me show you sectors today. this is nothing stepping up to the plate here. so everything is just kind of flat, energy, tech, materials, industrials, banks, which was the major leadership group in november, none of them are really stepping forward. you can see this in the action in the individual stocks the last five days. just put up industrials and financials, show you a few of them. united tech's been doing all right. these are the last five days we're talking about. but caterpillar, also industrial, hasn't been doing anything.

travelers and financials have been doing all right, but goldman which i called yesterday, the most important stock in the dow for this quarter because it's about 25% of the dow's gains, has just faded away in the last five or six days. that's not good. take a look at some of the tech and consumer names. jim was mentioning microsoft. it's true, microsoft has been a leader the last few days but then cisco does nothing. so you don't get any consistency within the sectors. and none of the consumer stocks, johnson & johnson hasn't done anything, pfizer and merck have done anything at all. they've kind of faded away here on very, very light volume. by the way, this lack of leadership, it's not just the stock market. we're having this problem because really all asset classes in the last several days so the dollar stopped going up. gold has stopped going down. long dated treasuries have stopped going -- everything is a great flattening in the last five or six days. that's why we're having trouble getting over dow 20,000 right now. so here's where we are in terms of the markets right now. we'll call it a leadership pause. the volume is understandably

drying up. it's a seasonal thing here. we do usually rise the last two weeks of the year. the dow has a tendency to rise about 1.5% in the last two weeks. i still believe that's probably going to happen. the market is still -- the momentum is still on the side of the optimists and the bulls. the internals are very, very strong. there is no stock for sale. nobody's dumping large amounts of blocks to get out of the market. everyone is waiting and hoping the market will drop 5% so they can get in more at a lower price. that's not the sign of a market that's in any kind of real long-term trouble. one quick comment on the semis, you heard a lot of comments this morning on micron. remember, micron and nvidia, have been absolute monsters, very positive comments from micron this morning. positive market momentum, favorable demand trends, limited supply. looks like dram and manned prices are going up in 2017. it's a huge move. but nvidia, advanced micro and

micron enormous moves. you can see advanced micro up 65%. nvidia, micron doing really well. nvidia's up, gosh, just a lot this year. probably 200 -- advanced micro's probably up 200% for the year. micron's probably up 60%, 70%. these stocks have had enormous moves and the stock you want to own is sxd has been going up for a long, long time. it's essentially doubled in price since 2013. so the overall market has been strong as chips are virtually in every item these days. and that's the internet of things out there. guys, right now the dow 28 points to the downside. back to you, david. >> thanks very much, bob pisani. let's head to the bond pits. rick santelli joins us from the cme in chicago. rick. >> good morning, david. you know, the fixed income markets, foreign exchange markets, equity markets, many are trying to find exactly baht rhythm is to this with regard to fundamentals versus things like hope, but i can tell you there's

a lot more with regard to clues there. we've had a very orderly move. now, check out one-week in tens. really tight range. hovering basically in the mid 2.50s and consider this the high yield close currently is a whisker under 2.60. closed last year at 2.9. so if the high yield close for this cycle is at 2.50, we're four away, 29 up on the year. look at fives, it's cycle high close on the yield side is 2.09, it's currently trading at 2.04, five basis points away. it's settled at 1.76, it's also up 29 like the ten-year settle at 2.7 up 29. if you look at the credit spreads, they've actually narrowed. so pretty much every indication that we have at this point is that when you try to understand if what's going on in stocks the hopium down the road has some reality to it, i look to these

markets, the capital markets. because in the past when we had more faux outlook for the level of equities, it was much tougher to look at the capital markets and say, oh, it's calm, even though rates are going up, signaling growth. it was much more sporadic, especially credit spreads, foreign exchange one-week the euro versus dollar, yes, it's hovering in the neighborhood of 14-year lows, a bit of an upward drift. i think what's important look at that four-year chart we used to use all the time. when we said 1.05 was the key. it closed under 1.05 a week ago tuesday. okay. and when i look at it, it's closed under 1.05 every time. we had one session this week where you close under 1.05. so from a technical standpoint it's still on the soft side. po monte dei paschi bank, everybody's been talking about it, look at it since the beginning of november, a ten-year chart basically approaching 16. it's at historic lows. no matter what kind of a spin you put on things, the other easy fundamental to recognize

with banks like this is it any wonder or question where capital is going to be going in 2017? right here in these markets. david, back to you. >> okay. thank you very much. there's that monte dei paschi again. thanks, rick. >> yep. coming up, a new setback for uber and what that could mean for the ride haling service. "squawk on the street" is coming right back.

on a morning when the s&p is down about a quarter of a percent, there are your biggest gainers led by micron, of course which with better than expected earnings. we're right back. one of millions of orders on this company's servers. accessible by thousands of suppliers and employees globally. but with cyber threats on the rise, mary's data could be under attack. with the help of at&t, and security that senses and mitigates cyber threats, their critical data is safer than ever. giving them the agility to be open & secure. because no one knows & like at&t.

generosity is its oyou can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter?

get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues. don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. it's the final stop trading for 2016. >> yes. i've got to tell you i'm surprised that there isn't enough readthrough from this amazing micron order to the need for more semiconductor capital equipment. applied materials obvious gainer, also lam, but applied materials should be up a dollar, at least. this is a company that's very inexpensive versus what is obviously the demand for capital equipment is going to be monstrous because internet of things. this stock's been a huge winner as is the whole group.

just understand that the readthrough if you go through entirely the conference call is we don't have enough equipment to make enough chips in order to meet the demand. so there will be orders placed, the cycle will eventually destroy itself way too far away for that, in the interim asmlf, lam, but most importantly applied materials deserve to trade at higher prices than they are now. >> what do we have on mad tonight? >> well, i was going to do this one as stop trading because it's probably the biggest downer today, which is, wow, redhat, which was a bad quarter. and the cfo resigned. i know the cfo, he's going to be a ceo of another company. he's a terrific guy. but jim whitehurst has a lot to talk about because it was a bad miss, disappointing and still have things about larger contract but there are issues involving redhat pulling down the rest of the nasdaq. >> jim, have a great break. >> you too. thank you. >> i know you and i will be chatting of course as we always do. >> we will. >> but try and get some sleep. >> i need this one.

i have to admit, i need this one. >> rest a bit. enjoy, have a wonderful holiday, happy new year. >> all the great holidays. >> thanks. jim cramer, of course he'll be back soon, don't worry. coming up, breaking economic news that could move the markets.

♪ good morning and welcome back to "squawk on the street." i'm david faber along with sara eisen and mike santoli. we are live from the new york stock exchange. carl quintanilla has the morning off. let's give you a look at the futures -- futures, that was last hour. we actually have an open market. you can see we are down less than 0.25%. that had been sort of the low for the morning for the s&p, the nasdaq also in the red and we have crude oil rallying a bit. >> our road map for the hour begins with a march to 20,000 after the dow tapered off from its all-time highs, will we reach that historic number in 2017? our market experts will weigh in. >> names familiar to our viewers, carl icahn and peter navarro have been tapped by president-elect to serve as advisors. we're going to break down what that means for this

administration. and donald trump meeting with the ceos of boeing and lockheed martin yesterday to bring aircraft costs down. we will speak to retired u.s. army colonel jack jacobs for his insight on the defense industry. but first, we've got more economic data breaking at this hour. rick santelli in chicago with those numbers, rick. >> yes. and i'm going to give you a couple of surprising ones too, actually. so let's look at the november read for personal income and spending. we were looking for up 0.3 on both, we missed on both, unchanged on the income side, up 0.2 at the spending side, there is bright news here though. our last look originally reported on the income side at 0.6, well, that was lofty, lost a little at 0.5 but held most gains. we gained 0.1 on the spending, originally reported up 0.3, up 0.4. personal consumption expenditure, core year over year something the fed likes to look at, our last look was 1.7, this time it was 1.6; arguably a

tenth lighter. here's the interesting factoid, last month was revised up to 1.8. we haven't seen a 1.8 year over year pce core since 20 -- october of 2012. october of 2012. so basically over four years. that is something i think the market's going to react to. let's watch the long end see if those rates tick up a little bit. finally, november read on leading indicators just missed 0.1 expectation came in at unchanged and last month at 0.1 remains unchanged. david, back to you. >> thank you very much, mr. santelli. let's bring in steve liesman get his take on the gdp revision, what economists are forecasting for next year and the numbers we just heard from rick. steve. >> who gets more excited than rick about a 1.8% pce number? it did come down 1.4 on the pce price index. that's kind of, you know, unchanged pretty much. and i think the fed's going to

look at that and thot be too concerned over gathering inflationary pressures. what really bothers me about from this number not only is the unchanged on personal income, it's the minus 0.1 on wages and salaries. i think ultimately it's a wash for growth in the fourth quarter running at 1.pme7. durable goods a big miss partly because of boeing deliveries were down 4.6%. lower than it had been. business investment though ticking up nearly 1%. and jobless claims also ticking up 275, still a good number but not as good as it had been near the 250 range. cnbc look at the 2017 and '18 outlooks for wall street's top economists. we found they've not yet embraced president-elect donald trump's optimism. while president-elect's team and his teams said could lead to 4%, 5%, very few economists see 3% in the next two years. the data of the forecast for the

next year sees growth rising, so there is some optimism. there is estimate of 2016 at 1.7, 2.3% in 2017 and that ticks up just be 0.2 in 2018 to 2.5%. some economists say we don't have enough info to really make a detailed forecast, but everybody points out that what's being discussed has some positives and also some negatives. so here's a kind of red light/green light on trump's policies. you can see on the left side there they like this infrastructure spending. the economists like deregulation, like tax cuts, like this idea of repatriating data and they talk about this idea maybe all of that ignites animal spirits. but then there's the red side, negative side, inflation could tick up, stronger dollar could hurtin iearnings and economy overall. economists want more clarity on what exactly donald trump means when he talks about import tariffs. of course the fed could end up being a bit more aggressive in

raising rates because of all this. and finally the deficit issue could tick up quite a bit. the survey underscores, guys, i think a split here. you have economists on one side, don't call dismal science for nothing and then stock investors on the other side, and, sara, they seem much more optimistic than economists are right now about the outlook for growth. >> just a quick question, steve, on the recent data, especially that durable goods numbers, snapshot of business investment. we're sort of in the period where some of the data is out post election, some is still prior. who gets credit for this sort of strength that we are seeing in the economy, president-elect trump on the boost in confidence or president obama at this point? >> so this is obama's economy. and i would say probably through march or april or so there is going to be some trump effect on the economy. and that entire effect comes through the markets, right? that's the only thing he's changed here so far, which is the level of stock prices. there could be a positive effect on the economy through that. and some of that may be offset

just a bit by the higher interest rates. so those are the things for which donald trump is responsible for. and really, when i talk to these economists, they don't see anything happening in terms of trump policies until the second half of 2017. and then really the bigger effects seem to be more towards 2018. but again, a lack of clarity, lack of data. i think also a lack of consistency. there's a lot of different push me, pull you stuff in the trump plans that economists are baking in and they don't get to those 3% numbers. >> steve, thank you. >> pleasure. >> keep an eye on it. also we will keep an eye on the dow. pulling back here further down 23, which puts us about 80 points away from the big 20,000 number. joining us now to discuss the markets, mark, pimco's cio of global credit and jason pride, glenmeade director. mark, we often look to the credit market for clues on where stocks are going. what sort of message are you going right now? >> well, we're getting a message

that's very supportive of trump. credit has been a fantastic year in 2016, the high yield market's up 14% since trump was elected equities are up 6%, the dollar's up 6% and the yen has actually depreciated 12. high yield spreads are 50 tighter since trump. so basically markets are really embracing these animal spirits right now. and there's a lot of optimism in the market at least post trump. >> so, jason, clearly we've seen that. where does that leave us from here? do you see this dash to 20,000 hitting this year and continuing and following through in 2017? >> look, i don't know about it hitting 20,000 this year. and actually, i don't know if the number's really all that important other than kind of a benchmark in people's mind. what we do know is that while equities have run pretty fast here at the end of the year, maybe it's trump election inspired, maybe it's just the fact economic growth has ticked up which was even occurring before the election.

either way the market and sfotos have run up at the end of the year, going into 2017 though our outlook is though, you know, all these policies they're being tossed about and the turn in economic data we're seeing both domestically and internationally hints at this idea that this already long in the tooth expansion actually gets prolonged even longer. whether we hit 3% growth or not, it really doesn't matter as much as the fact this expansion keeps going into the eighth year, perhaps into the ninth and maybe the tenth later on because we just don't have the excesses and the extreme animal spirits that have built up that normally bring about the end of an expansion. that's good for equities. it should be good for equities going into the year and should be good for equities going into next year. you know, that's kind of backdrop we're seeing. we're not necessarily calling for a lot of 10% and 15% gains, but we are seeing this is a supportive environment for the economics and for equity investors on the whole.

>> mark, you mentioned the good news from a bond investors perspective that corporate debt has done very well since the election essentially as absorbed the entire increase in treasury yields. but can that continue? in other words, from here on out if treasury yields go higher, will it not also hurt those other types of bonds that have been kind of a shelter? and really, what's the correct level, do you think, for say the ten-year treasury note environment we're likely to see? >> right. let me tackle the credit markets first. i think there's a lot of optimism. even before trump there has been a transition off of monetary towards fiscal. we've gone from globalization to deglobalization anded china-u.s. relationship i think is deteriorating. china last year sold 150 billion of treasuries. so this means higher interest rates and, yes, earnings are picking up, which should support the equity market. but equities also have to deal with higher inflation. and that means higher interest

rates. and also a stronger dollar, which will impact manufacturers. so the bottom line is, you know, we could see the ten-year go to 3%. and while the market's romancing all the positives of trump, what they're not romancing is basically the protectionist policies, the anti-immigration policies, the strong dollar, the higher interest rates and quite frankly that will slow growth. and so there's positives and negatives. and our message is derisk right now because there's two-way risks in the market. and right now the market has really embraced mainly the positives. >> absolutely, jason, animal spirits. you used it. mark used it. ray dalio used it in a recent link linkedin post. seems to be the trendy -- what is investment growth for next year? >> well, i think you need to put into two context. one is extreme animal spirits we tend to see at the end of an economic cycle where you have a buildup of manufacturing

capacity, of business capacity, a big buildup of debt, those sort of things tend to end in a very difficult manner and bring about the recession. we haven't really seen that now. what we're seeing right now is a buildup of confidence. maybe there are admittedly some animal spirits in the markets driving valuations a little bit on the high side, but still we haven't seen the extremes that normally bring about very difficult environments. yes, we could see a little pullback here and there. yes, i actually think that corporate bond mashlgt, the credit exposure, that may be more extended than it should be. but on the whole it's kind of an area of gray. we have a buildup of some animal spirits in the marketplace, but in terms of stwaul buildout of capacity and economics and build out of debt at the consumer level, we haven't seen a very dramatic amount of that, not enough to bring about a recession, just enough to perhaps say, look, the markets may be a little ahead of

themselves and may see some difficulty on a near-term future. but on the whole the big backdrop is still a positive one and a positive direction. >> and we will leave it there. gentlemen, thank you for joining us. mark keisel of pimco and jason pride. coming up next, the president-elect naming billionaire investor carl icahn as his special advisor on overhauling federal regulation. so what impact will it have on the trump administration? scott wapner will join us with that next. but first, take a look at redhat. company's share is getting crushed this morning after reporting revenue below street estimates as well as seeing its cfo depart for another company. redhat currently trading down up 17% over $13. more "squawk on the street" coming up next. 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.

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you totally nailed that buddy. simple. don't let directv now limit your entertainment. only xfinity gives you more to stream to any screen. president-elect trump announcing carl icahn has agreed to serve as his special advisor on regulatory reform. the billionaire investor was one of the earliest supporters of trump's presidential campaign. the president-elect issued a statement saying icahn's help on the strangling regulations that our country's faced with will be invaluable. of course icahn has made no stranger, guys, of his opposition to certain regulations in part dealing with them in his businesses, whether it be rail cars, which he's a huge owner of, or refining. >> yeah. >> he is coming up on "halftime," by the way. scott wapner is going to have him discuss a lot of this with him. i feel like we've already heard a lot of what he has to say in his previous appearances on our air. we know he's been talking to president-elect trump quite often, as have a number of other

significant investors i know as well who've sort of been in the trump camp from early on. >> yeah, seems like they're giving a name with a special advisor but without really any federally role, so maybe just kind of putting a label on what he's already been doing, taking phone calls, giving advice on very specific perhaps regulations or regulatory approach. his stocks are rallying, icahn's. >> how does that not present a conflict of interest though? he's advising on certain industries and can still hold the companies that will clearly benefit from some of these policies he's advising on? i mean, not being a federal employee, sure. but that would means, i think, he doesn't have to sell any businesses to be advising trump. >> no, and i'm sure he will not be as you're right he's an advisor for whatever term that actually means. to your point, he has been. and my understanding is and speaking to people who've been speaking regularly with the president-elect, he talks to a number of significant people in the investment industry who at least were supporters of his,

whether it be a carl icahn or a paulson or a nelson peltz, they have the president-elect's ear. and they speak with him frequently. and i'm sure icahn has been doing that. >> yeah, actually, since the election, so his publicly traded vehicle, icahn enterprises, is up more than 20% because he owns a lot of the heavy industries, so in other words the market already figured out things are going to be going in the direction perhaps that would be helpful to owners of those types of assets and the fact that icahn had president-elect trump's ear already. so maybe just calling him a special advisor is just again formalizing the relationship. >> well, we're going to hear a lot more about it, right? >> yes, he will be on at noon. to your point, we're not talking about a confirmable appointment here of any kind. >> right. >> but others were also brought on as advisors, sara, i know as well. >> yes, tapping -- donald trump tapping noted china critic peter navarro to a top trade post to head a newly formed white house counc

council, has been a very harsh critic of china in the past, has basically helped shape, according to reports, president-elect trump's views to some extent on china and help articulate them including those imports that were suggested on china. here's what navarro said back in july on cnbc. >> what donald trump has said is that we are going to use tariffs as a negotiating tool, not an end game, as a negotiating tool to force countries like china, half of our trade deficit, he's called them the biggest cheater. he's right. to force these trading partners to stop the currency manipulation, and illegal subsidies, to stop the intellectual property theft that takes $300 billion out of our economy. >> just to emphasize how tough navarro is on china, he did write this book, "death by china." here's a quote at some of the language he uses when it comes to china as a currency manipulator, which really isn't an out of the box idea, but his views and the way he

characterizes it really does go past the mainstream, if money is the root of all evil, then china's manipulation of its currency, the yuan, is the tap root of everything wrong with the u.s.-china trade relationship. for more than a decade chronic u.s. trade deficits with china have dramatically slowed america's economic growth rates, our employment rate but yet it would be impossible for china to keep sucking life blood out of our economy without the fangs of currency manipulation. i wonder how this is going to go down in beijing. it's not the first shot trump's fired at china and he's not even inaugurated. it's kind of an intense dance -- >> without a doubt though there doesn't seem to be anything delicate about what mr. trump as president-elect is doing at this point to say that there's going to be a reset of relations between the chinese and the u.s. i think is an understatement at this point. and you have to consider this

very carefully, michael, as you look at your portfolio i think as an investor. of course it's going to have so many ramifications far beyond what it's going to do to stocks in terms of trade and so many other areas. i would city note they do hold an awful lot of treasury notes -- >> without a doubt. what's interesting a lot of the elements china's trade in currency policy seem like they're rooted in a little bit of a prior time, right? sara, what do your fx people tell you what would happen if china would let their currency float freely? >> it might fall. >> exactly. they're holding it up more than they're holding it down. so that was a prior time. also, they're no longer the labor cost producer. it's about the scale of automated manufacturing you had. you had a lot of reports on that this week. so the game was certainly this way for awhile. and look you have a lot of u.s. companies that have pulled out and said, look, we can't profitably do much business in china, certainly valid criticisms. >> as of course cyber espionage but even there things have

quieted a bit from what was an extraordinarily active effort by the chinese to steal corporate secrets. and i'm not saying that isn't happening any longer, but you did have president obama and xi jinping have a meeting awhile back where obama made it very clear that this had to stop and things have calmed down there too. >> well, russia's taken over headlines a lot on that front. >> yes. >> just in terms of the journal piece saying who could be at risk here if this gets worse, this whole u.s.-china back and forth, corporate america likely targets the journal, says, include boeing and farm exports from midwestern states as a real way to get at the republican senators, for instance, where it hurts. in some of their own states. but you got to look at consumer names too, apple, starbucks, nike, proctor & gamble. they've been investing so much in using china as a consumer growth engine, general motors, the list goes on. >> yep and this is not the last time we're going to be speaking about a very important issue, of course. as we head to break, let's give

you a look at shares of boeing, sara just mentioned, and lockheed martin. now, these companies ceos met with president-elect yesterday to discuss aircraft costs. we're going to talk to retired u.s. army colonel jack jacobs after this break. more "squawk on the street." stuck at a work thing. y,'e with directv and at&t you can stream all your favorite shows without using your data. that makes you more powerful than a table for 60. wednesdays are the new thursdays! or the mandatory after party. how early is too early to leave? you're not going anywhere. i'm not going anywhere. it's your tv, take it with you. watch all your live directv channels, on at&t, data free.

president-elect donald trump meeting with the ceos of both lockheed martin and boeing yesterday. the topic du jour, federal costs for the f-35 fighter jet program and as well the replacement for air force one. after the meeting, boeing's ceo pledged to keep costs for the presidential planes below $4 billion. take a listen. >> we're going to get it done for less than that, and we're committed to working together to make sure that happens. and i was able to get the president-elect my personal commitment on behalf of the boeing company. this is a business that's important to us. we work on air force one because it's important to our country. and we're going to make sure that he gets the best capability and that it's done affordably. >> joining us now former assistant air force secretary for acquisition and research marvin samber, and nbc's

military analyst, retired u.s. army colonel jack jacobs. mr. samber, let me begin with you, it's no secret to those of us who even don't report on the military that the f-35 has been a troubled program. but what could the president do assuming these contracts are well reviewed, written to span many, many years, what can you actually do when you're a president to change the trajectory and/or the payments? >> well, the president has the ultimate clout. when you're a part of the pentagon's staff here, you're treated as if a political appointee as if you're the summer help. people know you're a transient, you move out. and if you want to do anything significant in terms of changing anything, political antibodies come into being because they say, okay, so many people will be let go in a certain state if the program is canceled or if the program is basically

changed. so you don't really have as much clout as the president. so when the president gets involved intimately as president-elect trump is doing, it really causes a lot of good things to happen. a lot of people really take this seriously because, as i said, he has the ultimate clout to do things. to change things. to make things happen. even if you have a contract, there are options in that contract, there are ways of making modifications. but they're difficult to do unless you are the president of the united states. >> colonel jacobs, you know, i'm curious to see your take particularly on that answer. is there really room here to operate if you're president to make significant changes in a program of this type? >> well, you can always make changes. it's interesting to note that i think in most cases if you want to cancel a program, it costs more to cancel a program particularly in the new years than it does to keep it rolling, which is one of the reasons we have kind of the problem that we

have in a lot of systems that we've contracted to do. but sure the president can -- if he wants to micromanage anything, he can get the cost down. the real question is whether or not the effort to do so is really worth it. you are going to save some money. and of course the president-elect has used some political clout and physical muscle to get denny mullenberg to say, yeah, we're going to get the cost down, but getting the cost down is usually a function of change specifications and at the end of the day you really don't save that much more money changing little bits and pieces of the specifications. you need an aircraft -- a series of aircrafts to tell you the president and national command authority around particularly in an instance in which there's a threat to the united states. that costs money. and in this case it's going to cost around $4 billion no matter what you do. >> marvin, i'm having trouble

figuring out should the defense industry broadly be nervous about president-elect trump or excited about the prospect of more military spending? >> well, i think they should be excited about the prospect, but with respect to that answer that the colonel gave, in isolation when you look at this program in and of itself, you may say there's nothing you can do. but the fact is lockheed and boeing have many, many, many defense contracts. some of them are coming in the future. and that gives a president or something of his ability the ability to negotiate things. you want some changes here, then you're going to have to give us, you know, something going forward. so there's always negotiating room to change things when you have future business that may or may not be at stake here. so you do have the capability to make changes given the enormity of the defense budget and the lockheed and boeing share of that. and a lot of it is to come, as you just mentioned. defense spending is going to

increase. >> yeah, i mean, so colonel jacobs, whether you do have leverage or not, clearly he's going to try to target and impose some sort of cost discipline on these companies. can you just address the question broadly about what defense companies should expect from a trump administration and how scared they should be of getting singled out like this on twitter? >> well, secretary sandbur brought up an interesting point about contracts. i think there's going to be some bare knuckle closed door sessions in which you're liable to see a reduction in a large number of the contracts that the government has with government contractors in the defense sphere. and maybe not going to be a lot of savings in any individual contract, but to quote everett

dirkson, a billion here, a billion there, i think there eventually will be a number -- the cost of each contract, recognizing every time you do that there's some risk, sitting down and cutting out the fat is good work, needs to be done and it's going to take a lot of hard work and going to be labor intensive to do. but, yes, you're going to see that among all the government contracts. >> all right. we'll be watching closely. gentlemen, thank you both for joining us. marvin sambur and our own colonel jack jacobs. let's get over to sue herera right now for a cnbc news update. hi, sue. >> hi, sara, good morning. here's your news update this hour everybody. three car bombs ripped through an outdoor market in mosul killing at least 15 civilians and eight policemen and wounding dozens more. several of the injured were send u sent to a hospital in irbil. a human rights organization says isis fighters were deliberately targeting civilians in areas they'd lost to government

forces. and russian president vladimir putin laying flowers and offering condolences to widow at the ceremony at the foreign ministry in moscow. california gun owners scrambling on wednesday to purchase assault rifles before a new year's ban goes into effect. governor jerry brown signed the measure into law back in july. it includes a ten-day waiting period for all guns. and u.s. home affordability has hit an eight-year low according to adam davis solutions flt during the fourth quarter 29% of county housing markets were less affordable than previous periods. that's the news update this hour. sara, back to you. and mortgage rates are just going up. not getting any bet sgler they are. >> sue herera, thank you. when we come back, morgan brennan will be here to break down how those defense stocks we were just talking about are performing after president-elect's meeting with boeing and lockheed martin. and next, we'll talk technicals with btig's chief technical strategist katie stockton, what those big round numbers like dow

20,000 actually mean. stay with us. what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley

let's quickly send it over to jackie deangelis at the energy desk with some breaking eia data. jackie. >> good morning, david. that's right. we're looking at natural gas prices after the department of energy reported a 209 billion cubic feet drawdown in supplies last week. that's four times what we saw this time last year. it's about double the five-year average. so you can see prices were a little bit higher in anticipation of that report. we were in line with expectations, so we've come off a little bit. but remember, back in early december we hit a high of $3.75. so a lot of people are wondering if we're going to sort of stabilize a little bit. it really all depends on the weather. this kind of drawn e drawdown comes because you see a rise in demand because of the colder temperatures. right now different models are saying different things as they always do. we're going to have to see how this plays out. but i want to say by all accounts we've seen a big move

in natch rural gas, about a 20% spike. consumers tend to get concerned about this, but remember when your natural gas gets to your home it's negotiated through a long term contract. the futures don't really impact it say the way prices at the pump are impacted. so futures are something to watch to see for longer term trends, but a lot of people concerned about what's going to happen this winter. back to you. >> jackie, thank you very much. while the trump rally has slowed down, the indexes flattened out a little bit lately as the dow flirts with 20,000, we're here with katie stockton, chief strategist at btig to see what the charts could say next. good to see you. >> good to see you. >> we have the dow flirting with its all-time high, what does this tell you in terms of what the index can do? >> there's momentum, right? we saw breakouts in november and immediate positive follow through. that tends to be bullish from a longer term perspective. as you mentioned there's been a little bit of a loss of momentum recently on a short term basis as we've approached 20,000 for the dow industrials. that's not really a resistance

level, but somehow market psychology creates resistance at times near those round numbers. this would be a very natural place for pullback. >> also come s&p 500 at an all-time high and overbought conditions and maybe the market is tired. >> overbought and uberly bullish sentiment based on the transactional data like the vix or put call ratio. natural time for pullback and i think it would be healthy to relieve that over what we've seen a 9% plus rally. >> the dow has been an outperformer since the election, that looks like a sharp vertical line. this is a ten-year chart. >> right. very impressive long term uptrend. but when we look at the downside potential to the 50-day moving average for one it's more than 5% at this stage so does create a little worrisome setup again over the short term. i think we should look for an opportunity closer to the breakout points we saw in november to add exposure early next year. >> so we might be in for another one of these patterns where we

finish the year strong and january you have some pullback? >> i've been the belief pullback will start before year end. no santa claus rally, which is typically last five days of the year into the first five of the new year. we might not see that because we have some momentum, some rising just now. i think that will unfold and take us into early january. >> but not a replay as far as you can tell of last year when you really had kind of a very nasty correction into february? >> i certainly hope not, for one, but pullbacks do tend to be somewhat fast and furious. in a way that's actually indicative of a counter trend move. what we'll be looking for is not only an oversold condition but also the market internal measures, things like breadth and leadership and sentiment to reach levels where they're at extremes quite the opposite of what we've seen recently. >> so where does it take you in terms of an s&p target? we get some kind of pullback here, you think it's a good entry, where does it go? >> it's essentially already met the short term breakout that was

around 2285 but you can arrive longer term target about 2400, there's a round number for you, right? that's from the breakout that occurred over the summer. to me that's very realistic still for q-1 and that's our upside. so when we see a pullback, we want to add exposure to potentially take advantage of that. >> katie stockton, thank you very much. >> thank you. let's send it to dom chu for a quick market flash here, dom. >> sara, we have a small cap company, it's weight loss related, it's weight watchers. shares are up really big, why? you guessed it, it's oprah. in the latest marketing campaign the media mogul says she lost 40 pounds since joining the system. you're seeing some of the ad right now. the gains are big, but they need to make up a lot of ground. even with the gains those shares have lost half their value year-to-date, but weight watchers a stock catching people's attention in today's trade. >> isn't she a shareholder? >> she is. >> that's a great incentive to lose weight. >> and a board member, a 10%

shareholder and board member as well. a big move. >> the power of oprah winfrey, dom, thank you. as we head to break, let's check in on the markets here. the dow is off about 20 points. we have not seen back-to-back losses for the dow since before the election, november 4th. but we are heading into our second day here. so we'll see what happens. s&p is down less than 0.2%. nasdaq down about 12 points. later, jason calacanis will join "squawk alley" for his take on alibaba and all things tech. much more "squawk on the street" when we come right back. the infamous traitor. and i know a thing or two about trading. so i trade with e*trade, where true traders trade on a trademarked trade platform that has all the... get off the computer traitor! i won't. (cannon sound) 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.

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how are defense stocks reacting to the president-elect's tweets and callouts? our morgan brennan has been tracking their performances and has more on the moves. >> mike, that's right. take a look at shares of lockheed martin. still down about 2% from last monday when president-elect trump first tweeted about the, quote, out of control cost of

the f-35 joint strike fighter program which lockheed is prime contractor. on the heels of the meeting yesterday, the two discussed the company's progress to bring costs down with, quote, continued commitment to delivering affordable aircraft to the u.s. military and the u.s.'s allies. prior to the f-35 tweet shares of lmt had soared 9% post election. they soldoff last week on the heels of that tweet. they have retraced but not regained all of it. a similar chart for northrop grumman, but it's been a bit better for boeing which also met with trump yesterday with ceo dennis muilenberg vowing to keep air force one replacement costs below $4 billion. that stock's up 3% since trump's stweet on that company and nearly 10% since the election. so overall defense stocks they've had a great run this year.

the aerospace up 20% for the year, up 10% since the election. one of the reasons is defense spending is expected to grow both here and abroad, both because of the new administration and also because cyclicly the sector is due to grow. so the big question, how will that funding shake out? and how mituch more risk sharin of these costs will contractors be expected to assume for the high profile platforms? that's making the trump administration's fiscal 2018 defense budget proposal a must read when it comes out likely the spring, likely in april. guys. >> yeah, considered one of the big winners. morgan, thank you, morgan brennan on the defense stocks. now to rick santelli in chicago with "the santelli exchange." good morning, rick. >> good morning, thank you, sara. i'd like to welcome my special guest, driving all over the country it seems this week, mark, thanks for stopping and taking the time. >> yeah, i'm headed to utah for the holidays and then california

to teach at chapman university. but i'm here in denver to talk to you about the markets. >> excellent. listen, we had last revision, last look at third quarter gdp at 3.5. it wasn't a bad quarter, but problem with the quarters last handful of years is that when you average all four of them, you don't end up with much over 2, sometimes a little less than 2. atlanta fed now at 2.6, but everybody else is under 2. they'll make a revision. give me your thoughts on the current state of gdp and how president-elect can ramp it up. >> well, i certainly think he has a good chance of doing it since under obama we had eight years of less than 3% growth. i don't think we've ever had that before. except go back to the great depression. so there's -- it's a weak economy. my own statistic gross output and my b to b index showed anemic growth. it did have a little bit of a jump here, but i think the markets are telling us both the

rise in interest rates and the stock market rallying that we're looking for a robust economy under trump. now, i think it's pretty amazing that we've gone 32 years, maybe 34 years of a bull market in bonds but your favorite area. i think that golden age is over, and it's pretty shocking we went as long as we did with that kind of change. so now we're going to see dramatic change, higher interest rates, higher inflation, probably higher deficits. and maybe even a stronger dollar even after the weak obama administration gave us a strong dollar, we may even see a stronger dollar under trump. who knows. >> all right. listen, final minute, mark. you know, we have a real tea party guy elected in 2010, mick mulvan

mulvaney, omb virtually uses static scoring for things like tax changes. do you think we'll see a shift to more dynamic scoring? do you think it's something that we should do? >> well, first of all, let me just say that only in your dreams, rick. isn't this a truly amazing that eight years after your tea party ran to we have tea party people running the government, especially the budget? i mean, i have to give you a little bit of credit for that. and, yes, i think dynamic scoring is going to take place, but we're talking about i just had a meeting with a supply side transition team that included steve moore, larry kudlow, and both were giddy about the sharp drop in the corporate tax to 15%, the deregulation, the encouragement of small business. so i'm a big fan of the russell 2000 as far as a market is concerned. but, yes, i think the dynamics are very favorable.

but trump is, i think, a supply side change man. we'll see if he can really cut government spending. i have my doubts. >> excellent. happy holidays, merry christmas, can't wait to talk to you after the new year. that was mark david faber and gang. >> all right. thank you, rick. send it over the mike, now, as well. >> all right. we'll send it over to jon fortt with a look at what's coming up on "squawk alley" at the top of the hour. >> like a flea-flicker, mike. yes. coming up on "squawk alley," new evidence that russia was, in fact, behind those political election season hacks. also uber slapped on self-driving cars in san francisco. we'll find out where they're going to go with several driving next. finally, billionaire carl icahn has a controversial role in the trump administration. we will dig in on that and find out what the controversy is coming up on "squawk alley."

as 2016 draws to a close, cnbc is looking at ways you can make money in the coming year. this hour we're going window

shopping with retail. here's courtney reagan. >> retail was all about online shopping in 2016, and 2017 it may be all about leadership and policy changes. here are three predictions for the new year. longtime macy's, starbucks, and df ceos have announced they're retiring in early next year and they won't be alone. as the piece of change in retail accelerates, look for more longer-term ceo seats to change as well with a combination of retirement announcements and upheavals. look for new ceos with more diverse experience to step in. >> retailers that source clothing and shoes from overseas may have to go back to the drawing board when it comes to their supply chain. if trump talk of major change on trade, tariff, and imports regulations are realized, it could increase costs and compressed profitability because passing on costs to consumers will be nearly impossible. while many are looking for inflation under a trump administration, you won't see it in the prices shoppers pay in

the near term. for more than 30 years, prices consumers pay have been flat or lower compared to the year prior, even when cotton prices doubled. price crusher from newer players like forever 21 plus stalwarts like walmart and t.j. maxx make it too hard. so that's 2017, but you have to get through 2016 first and there are three very critical days left for retail, especially if you haven't finished your shopping. we're here at amazon's prime location in new york city where you can get at least a select number of items delivered to you if you're in one of the 30 locations. you can get them in under two hours. back over the you. >> it is crunch time over there, courtney. one question. you've been doing so much good work on this border adjustment policy we could get out of trump and congress next year, really would affect the retailers. inconceivable policy cliff from cowan. how can prices not go up for

consumers if they're going to have to deal with this massive tax? >> i think -- it's one of those things the retailers would love to do. they would love to be able to pass on the prices to the consumers and have you take away some of that cost for them. i just don't think consumers will take it. they already want 50% off during the holiday season. it will be real hard for them to pay $30 more for a sweat they're didn't change. >> a tricky balance. thank you, courtney. see you later at amazon today. coming up, donald trump backing up his tough talk on china with a new hire. ian bremer will weigh in. great guest on a hot topic.

the dow is back to levels near 19, 900, so we're about 100 points away from dow 20,000. one stock to watch would be goldman sachs. it has been a key to this march higher in the dow. >> and of course it's the highest priced stock in the dow. therefore it has the most influence. it's backing off another to have another news of settlement about some fraud, but it is the one to watch although really the entire market has found itself without a lot of fuel in the tank as the dow got there. keep in mind, the s&p 500 also pushing up against its all-time high and has retreated from there.

we'll see if that interim period the last week of the year is going to have any strength. >> been a good run for stocks. been a better run for bitcoin. just wanted to mention this because the price is above 800 again. one of the best investments of the year up 87%. so for all you haters out there, china, india also. we'll looift on that ♪ for "squawk on the street" and send it to you, kayla, for "squawk alley." >> thanks, guys. 8:00 a.m. at uber headquarters in san francisco, 11:00 a.m. here on wall street and "squawk alley" is live.