>> you have to now be polite. >> i'm touched. >> you love soccer, right? >> i do love soccer. it airs on nbc. it's really hard. i'm not a weather man. have you ever seen -- >> yeah, they can do backwards like mirror image. >> thank you. and i'll be here and have to put up -- i guess i'm not going to be able to hide that. >> 41. >> the new 41. make sure you join us tomorrow for the big day. sidney sorkin just missed being born on the best day. make sure you join us tomorrow. "squawk on the street" is next. ♪ good thursday morning. welcome to "squawk on the street." i'm carl quintanilla, jim cramer, david faber at the new york stock exchange. premarkets a bit cautious this morning, big hearing of intelligence officials on capitol hill, global pmis and of course ces in las vegas. europe is mostly mixed this morning. ten-year around 2.42, adp was

weak ahead of the jobs number tomorrow. a handful of ugly misses, store cuts and outlooks, macy's, kohl's, l brands all moving low sgl er. >> and market slipping away from 20k. a day of record auto sales. >> and trio of news to get to on apple, the app store and a new $1 billion investment from that company. we're going to fill you in. but first up in about a half hour from now the senate armed services committee will hold a hearing on cyber threats against the u.s. sparked by allegations that russia engaged in hacking to influence the u.s. election. committee chairman john mccain favors creating a special committee to investigate russia while president-elect trump has expressed obvious skepticism about the russia hacking probe. journal today reports the president-elect is working with top advisors to revamp the office of the director of national intelligence which is this nation's top spy agency created after 9/11, guys, to sort of coordinate intelligence

from various officials. question is what the president-elect believes, what john mccain is going to try to get some of these intelligence officials to say. basically their opportunity to make their case before meeting with trump tomorrow. >> yeah, i mean, i always hesitate to dive into politics, but i do want to always try to relate it back to the stock market. anything that delays the agenda of deregulation, corporate tax reform and repatriation is something that makes stocks go lower. this is the kind of thing which maybe says that prominent senators use to be able to express independence from trump, which therefore could delay the agenda. obamacare repeal was something that was seized on that was so aggressive that you could delay the agenda. we're hearing a lot about the border tax. that is something that is not part of the agenda per se. trump did favor, but i'm saying the context that i want to approach this cyber hearings is

just strictly -- could be a declaration of independence by some republicans. >> or potential wedge that could effect other outcomes, other policy -- >> trump got a mandate, maybe the mandate is not part of what the senate perceives itself. you know, this is something you talked about yesterday, david, which is the idea once you become president, you've got people who are not necessarily on your team, who are a part of your party. and maybe they express -- you get bogged down on this, then the next thing you know maybe you have to retroactive tax cuts -- maybe you don't even get the tax cuts. >> mandate or not, i think you're right to the extent that the business community and investors in the stock market have been focused on tax reform. and to any extent -- by the way, we don't know of course. you can do both. you can repeal and replace the affordable care act while you also pursue tax reform.

and they're not unrelated. there are certainly aspects of the aca that involve people's taxes. >> very true. >> you're right. that's where the focus has been for our constituencies. >> right. >> the people we speak to. and so if this does get pushed as a result of internal squabbles over intelligence or even how to go about repealing and replacing obamacare, you push back tax reform. >> that was reflected somewhat in the minutes from the fed, uncertainty about size, timing, composition of all kinds of policy matters. >> they link it too. all these things have linkage to the stock market. look, rex tillerson is up to be the secretary of state nominee for the president-elect. and that figures in this too because he's regarded as someone who received a medal from putin. now, there are historical analogies people can go back to and say, listen, when you get medals from dictatordictators, not necessarily something that if we produce hard evidence that

putin was doing the hacking, then you could use that against tillerson. i don't want to spin negative scenarios because i think the problem with that is that's msn. that's not me. that's another network. i'm just saying, look, there's an agenda and the market is near 20,000 because the agenda, the tripod of deregulation, corporate tax relief and repatriation and anything we talk -- we're going to cut away to these hearings today. we're not cutting away to when you're going to get your tax break. >> because we don't know. >> we don't know. >> when the hearing begins, of course, we get some headlines, we'll take that live when clapper begins to speak of course. meanwhile, a rough morning for retail. both macy's and kohl's down sharply after lowering profit guidance for '16, weaker than expected holiday sales. macy's also cutting 10,000 jobs, closing dozens of stores. we knew about the plan from last summer, guys, but clearly black friday although strong was buffett buffeted by weakness in early november, early december.

>> yeah. it was really an interesting interview with terry lundgren last night. the question was why didn't terry see it coming. the answer was two years ago they had their best christmas ever. so how do you see it coming in 700 days? and the answer is that you didn't see -- there's no way that you can keep up with amazon. one of the things terry said in the interview was, look, they're number three after amazon and walmart in the categories that they go for online, but online doesn't expand the pie. it doesn't pay the rent. so this was a seminal quarter. kohl's, i don't know, they're struggling for reason for being. matthew boss from j.p. morgan told you all this was going to happen, but people were buying these stocks, trump rally, trump rally. the only thing good is that pvh, manny came out today and said his numbers are going to beat. which what says is don't read through apparel being bad. they may be a beneficiary of all

the sales. but do read through that the mall and l brands today too, victoria's secret down -- >> is there something here we didn't know already going into the season? or talk about constantly in 2016? i mean, it's not as though we sat here and didn't talk about the mall and the decline of the mall every single week, not to mention the rise of amazon. not the rise of amazon, the incredible power of amazon. >> i think what we discovered is that amazon is not playing with -- the malls were won. calvary's fabulous. my grandfather served with patton. he had a horse. terrific. >> at the beginning of that war -- >> not so good against the mark iv tank. >> they didn't have helmets, they wore hats. >> yeah, didn't have a metal hat. world war ii was different. amazon when they deliver to the house same day, now we're talking thermonuclear. >> literally an air war when

drones come on. >> yeah. >> the overpriced f-35, i just find it was very discouraging when terry lundgren says we haven't figured out yet. two years ago they claim they're on the verge of figuring out. i think this is one of those things our mothers would say -- just using people who are wise. >> of course. >> well, jimmy, if you haven't figured it out yet, maybe you're never going to figure it out. wise words from louise cramer. >> not everybody has that belief. walmart and jet for example are expected by some to later in the year posting bigger year on year gain. >> i like that. i like what walmart's going to do. there's a thing called rth that has all the retailers in it, that can pull everyone down. i'm concerned saying nordstrom or penney's is different. they ha

it is sephora, we were doing instagram fashion shows -- i could post a picture, but i didn't. people don't walk out the door without makeup. but sophora is not publicly traded. >> also brings to mind this craftsman tool, black & decker brought it up today, talking with santoli upstairs about it, is this sort of the equivalent giving occupy your queen? >> it was a $2 billion deal a year ago. we thought it was going to be $2 billion. you could add it up and say it really does come to $900 million if you add in all the different pieces. it is interesting that eddie lambe lambert's fund just went 500 million -- >> he's put a lot of money into sears. >> yes. >> which keeps bleeding. they are closing more stores. sara the reit that owns those properties or leases those properties to sears is going to take some back. i think it's this summer when be

public for a year so any worries about fraudulent conveyance will go away. why do i mention that? well, where's sears going? it's up today, but what is the long term future for this -- >> don't look at me. montgomery ward -- >> when you figure it out, can you ask louise cramer? >> my father was fired from gimbal's because it was so good. all i can tell you is this company is being kept alive by hedge fund manager. and it does not have -- there's nothing in here that makes me feel like anything is better than expected. i really did feel craftsman is worth a couple billion, but it's a deteriorating asset. what's left, die hard? >> automotive, when you compare to the rest of the retail landscape, you could pick worse areas to be in. >> true, but in the end -- i mean, what is k-mart? >> what is kmart?

is that an existential question? >> you bet. sears and kmart like -- i urge people to go back to that class we took. remember that? these are no exit -- that's a suboptimal read. >> that's kmart. >> no exit. >> yeah. >> one last point here on the broad markets, dow trying for another attempt at 20k. s&p only seven points from all-time high. futures lower this morning as we said adp 153 is below the estimate. claims were ridiculously low on a holiday week. >> i know. can't count them. interest rates are a little lower today. i see already what's very interesting is like if you look at the article by a very good writer in "new york times" who really knows autos saying this was the peak. but i got tired of the peak. i like phil lebeau's work. and phil lebeau's work

definitively showed that the money is going to autos. that's what makes me really negative about macy's. really negative about kohl's. people were buying. they're buying cars. and i don't want to see anymore articles that say that disagree with phil lebeau that those businesses were doing well. because it just doesn't make sense to go against the man. >> no. don't. >> it doesn't. it doesn't. >> i'm with you. >> because we're the paper of record -- >> phil lebeau all the way. >> exactly right. >> i love when you guys agree. there's no raised eyebrow. >> when we really agree it's like -- that's when my father said why does he hate you? >> we're saving that for later. we'll see. you've got a lot left for me. >> i'm just getting started, believe me. >> so are we. when we come back, we'll talk about apple's billion dollar bet on emerging tech. vanguard's founder jack bogle, we'll keep our eye on the armed services committee on the hill, check in with ces in las vegas later this morning.

more "squawk on the street" from post nine after a break. ve edodtewheru . cor ns wehecllt wan ec it wl to ss createxenatu. aztrdgn'jukoat u tegiesdsothe

♪ couple of stories about apple today. the company has pulled the "new york times" app from its stores in china saying it is complying with a request from chinese authorities. meanwhile, apple's confirming it's joining softbank's vision fund with a $1 billion

investment. late this morning josh lipton with a story from the company that app developers earned $20 billion last year. 40% jump. we know apple takes a third of that incremental revenue. >> i'm glad you pointed that out. remember tim cook said this would be the year that the service revenue stream would be equal to a fortune 100 company, the smallest fortune 100 company is $27 billion. so it's obvious they're saying this is going to be really terrific. but my issue here again is if you don't do an acquisition to boost that service revenue, it just comes in piecemeal. the analysts will not give it a price-to-earnings multiple. i think that this is important. the "new york times" thing is very interesting. there would be a time we have a president might come in se i don't know if this is good censorship, but this president-elect, what's he say about "new york times"? >> failing. >> so maybe there's an agreement here between the -- i don't know. >> the softbank fund, which is

still in stages -- biggest investor saudi arabia will be in as much as $45 billion of the $100 billion is going pretty well with apple putting in $1 billion, qualcomm in, fox con also in, fox con makes the iphone for apple. you can see a lot of the connections here. qualcomm providing the chip sets. there's a lot of interrelationships between those who are investing. and remember, it's a fund run by softbank, but doesn't mean softbank is going to own the underlying companies. i haven't figured out or heard yet about the fee structure how that's going to work. and typically in these kinds of funds will softbank have the right of first refusal to buy the companies from the fund if it wants to own them? it's going to put in $25 billion, saudi arabia $45 billion and billions from others are coming in here. but it's going to be a force. i mean, even if they're not using any debt, just $100 billion, the equity to buy things, man, that's a lot. they started with this oneweb, i guess, or may put that in there

as a softbank investment in the fund overall. you have to think about it sort of as a venture fund. >> did you see fbr raised price target for sprint from 8 to 11, improved cash flow? softbank is not to be dismissed as someone that throws around money lightly. >> no, in the case of sprint you can argue they did throw around money there as much as $20 billion -- >> might be working. >> i don't think it's working yet. i think masa son knows he needs a deal to make it really work. >> t-mo is so hot. >> they're so sub scale at sprint and there's a belief t-mo is still subscale. masa son, that's part of the deal here. he doesn't go to trump tower just to be nice. he's thinking what can i get done here. and he wants that deal. but it's very much unclear whether that deal will happen. >> but do you think this justice department necessarily block a deal like that? >> the fcc, you can make two arguments on it. you can say you're going to bring together two subscale

players, john legere would obviously disagree with that. there's that day masa showed up with his paper and foxcon was on it and the investment. and you can see you're getting together sprint and t-mo and they're going to be the true competitor to verizon and at&t. >> that would be something. >> or you could conversely say, hey, having four has been incredibly good for consumers. t-mobile has introduced incredible price competitive. >> i don't think president-elect trump would like that. i mean, he's been -- if he didn't like time warner, how is he going to like this? >> although report in new york magazine yesterday suggested trump soliciting suggestions for an s.e.c. chairman from rupert murdock. we don't know who will lead the agencies. >> there's that 19th hole cabinet again. >> yeah, i think the expectation is you're going to have a very hands off fcc and doj.

but we always have that other side of the trump presidency, populism. and will we be talking about tweets in the morning when he sees there are significant job losses associated with the deal and calls people out the same way he called out gm earlier this week. >> this is unknown territory. >> when we talk about big deals, we're talking sometimes tens of thousands of jobs, not 100 here or 300 there. >> absolutely. i just know that -- i just think that the sprint -- a lot of people felt sprint -- i think sprint by the way is very well run. very good ceo. >> when we come back this morning we'll get cramer's mad dash, countdown to the opening bell, take one more look at the premarket. kind of soft this morning. more "squawk on the street" from the nyse straight ahead.

♪ all right. we have about seven minutes before we get going here and start trading at the nyse. you want to talk about the s&p's best performer of last year in the mad dash. >> up 220%. it's funny because before i did that zions upgraded today, comeri comerica, the reason i want to mention nvidia is because a lot of people feel ces doesn't matter that much. but the ceo of nvidia gave a talk last night about autonomous cars, that's who i first met that told me, listen, you've got to be in this nvidia, you got to tell people about it.

david, i think there are people who are beginning to see nvidia reminds them too much of qualcomm going into 1999-2000. >> except that was up almost 2,000 percent that year. that would mean this has a lot more to go. >> i agree. this is when they reported a breakout for artificial intelligence and machine learning chips as well as gaming chips as well as autonomous driving chips. so just to dismiss this next ramp as being wrong tells you be careful because intel when they came up with the 286, 386, pentium, well, had multiple years. i don't think nvidia's done. but be aware that ces was electric. ces has been a long time since i've really cared. nvidia. >> yeah. >> i just wanted to do some good news. there's a lot of bad news today. >> there is including news we just got on sears we were discussing earlier now closing 150 stores, jim. not clear how many that leaves. >> it's like a jet engine. one engine goes down, you have

three, two engines go down, hey -- >> you're going to be delayed. you're going to be delayed. as you can see the stock reacting positively. >> reacts positively to whatever because it's tightly controlled -- >> to your engine point of view, if they close them all down, go up even more. we got a lot more "squawk on the street" including the opening bell about five minutes away. we're back right after this.

you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in just a couple of minutes on a busy morning waiting for this senate armed services committee hearing to begin, right about now on capitol hill, regarding the intelligence community, jaim clapper going to testify, john mccain leading that. meanwhile, getting a release from sears holdings, some more store closings switching to what they're calling, jim, an asset light business model. >> well, i mean, the problem with that they're retail. it's not like they're a fabulous semiconductor company. you know, cost co, that's an asset light company and make the money from the card, i think the most telling story about sears today is how much stanley works

is up off the buy of craftsman, because i think they fleeced sears given that we were told it could be the chat was $2 billion, paid much less including just enough to cover a little bit more of the loan yesterday. i go back to something david said that was so brilliant. david, talking about these stores being closed, that creates open space for sur taj. >> well, we'll see. >> what do you have guilt.com here? >> again, you've got to at least go a year out before you clear a fraudulent conveyance claims on the part -- >> could be. stock's going to be up today. >> yeah.

>> get to the big board, big brothers, big sisters of new york city marking national mentoring month at the nasdaq, mind body, a provider of business management software for the wellness industry. [ bell ringing ] >> is that bell getting louder, or is it just me? >> no, it's gotten louder. they've changed the wall. much prettier. >> macy's, sears, kohl's, you mentioned costco, some reports about amazon and their potential interest in american apparel. >> right. >> some bid deadlines tomorrow. >> and the retail store they might be opening, i don't know, that just seems like a -- >> macy's closing 68 stores, sears 150, but amazon's opening a bookstore. >> very true. now, did you see the closings of the macy's stores? a lot of them were from the '60s and '70s, but a lot were open in the 2000. shows you the erosion of the malls happening so quickly.

one of the stocks down big today constellation brands going to be on "mad money" tonight. goldman sachs saying primarily tax driven beat. there are many concerns about cross border taxation, bringing beer from mexico, wasn't really addressed in the release. i think that rob sands is running a great company, but at the very moment everything connected with mexico is being challenged including the best selling beer in america. >> well, there's the peso of course, which is managing to regain some ground today. ksu got slammed on the ford news, right? >> well, i think that the peso -- i think people are saying, listen, this has got to end with the peso just going down every single day. but constellation brands on the surface looks like a great number. i don't want to jump to any conclusio conclusions, i know analysts saying this is not the beat you want to see.

>> out of the uk, 18-month high. >> yes. >> japan new orders 17-month high. >> the rest of the world is doing its job. i do think that the pound, that lower pound, i don't know, could help. the banks are out of the woods over there. look, we haven't even addressed the china currency. china currency seems like some people are saying, listen, complete reaction to trying to get on the better side of president-elect trump. but you could say the same thing about them banning the "new york times." >> you could. they've moved up over the last two days, right? that's what we're talking about. >> well, i think lots of people, wilf and sara, or sara and wilf, this morning, they lead with it. hand the book over currencies are the most important thing. that was kind of a, wow, the chinese trying to defend their currency in a way i thought they were supposed to be debasing their currency. >> yeah. monsanto had a pretty good quarter. of course it's still in the process of being acquired by

germany's bayer, not bayer, but 21 cents was ahead of a lot of estimates out there, stronger than expected gross profit in seeds, particularly corn and soybeans. apparently offsetting weak er results, latin america also strong. the deal with bayer, i mean, we'll see. expectations i guess are still leaning a bit towards that it will happen, but it is not without a lot of concern. and that's why you see the large spread between the actual value of the deal and where monsanto's stock price is. >> the comeback of ag is a big under talked about story. >> comeback of? >> agriculture. deere has had a remarkable move. ag co, which is -- fantastic job stels a lot in brazil. we don't talk about the rial

coming back that's very important. this ag story is getting legs. clearly we hit a trough in ag. and i think that by the way that's kind of reflected in the end of food deflation, which is one of the reasons why i think costco is going to have a little bit of a tailwind here. by the way, they had gasoline deflati deflation there's a tailwind, and tobacco tailwind. >> we are still awaiting those three enormous deals in ag, dow and dupont, bayer-monsanto and chemchina buyi ining syngenta. >> why is there such a big spread there kwaul kom and nxpi? >> i don't know. i don't believe there had been a thought that would be a significant -- >> i didn't either, the spread is now closed. >> i know. people have asked. it's all cash too. >> yeah, i look at that spread and i think how much qualcomm

needs auto. nxpi has free scale which is autos which is nvidia, but i'm looking at these deals, david, they're not coming together with the alacrity i thought they would if they're cross border. >> true. although in a trump administration i would worry a lot more about incoming than outgoing. >> interesting. >> so in this case you've got qualcomm buying, you know, nxp, whereas monsanto deal, i just don't know in the future those kinds of large deals. but if either you're going to have -- you're either going to allow it or you're not, right? >> right. but i've got to tell you, ed breen, who runs dupont, the level of confidence that he has in that deal closing is so strong that i always feel like i'm defying reality when i talk about questions there. i don't know. >> there have been plenty of times when i've had people on and we've talked about the antitrust impact of a potential deal and everybody's been extraordinarily confident. >> right. >> do you remember how many times -- >> baker hughes. >> baker hughes, i mean, so many

different times i can remember being told by the experts. and they were wrong. >> look, i thought that absolute ly kla and -- apparently intel got involved there and didn't like it. >> yeah, dollar stores, remember when the over bid made and everybody said don't worry about it. >> i'm waiting for walgreens which today reported better than expected number. >> the rite aid deal. >> yeah. >> or is like hagway. remember, they had that deal they bought a lot of the safeways and didn't work? >> they went bankrupt. >> the safeway next to my daughter called it hagen, that's why she called it hagway. >> although it was a miss on sales. they strip out the forex, some say not a high quality beat. >> i agree with that. i think what matters here entirely the accretion from the rite aid. but look, it's retail. it's in an etf. does it matter?

look at target. target didn't say anything bad but it's an etf. if you're an etf, you're getting hammered. kohl's is down nine. i mean, geez. >> zao, remember they went public here not that long ago, about a $7 billion or $8 billion company. apparently the cfo speaking on a webcast or i should say a conference perhaps a bit more cautious than expected. they're also at i think the consumer electronics show talking to people. demand environment still robust but procurement environment can be slightly different regarding accelerating revenue growth, a factor that is the buying behavior of existing customers. we're talking about telecom companies, many companies off table are now on the table. so when you consider that, who will get together with whom amongst their customer base, maybe they stop purchases for a little while. you know, is t-mo and sprint,

verizon, who knows who may do what to whom. that's worth watching. >> how about oil? talk oil. i'm getting bummed out here. >> why? why are you getting bummed out? >> this is like got a couple stocks doing well, but there's some companies down really badly. constellation down 11. >> macy's down almost 14%. >> yeah. >> i got my first credit card, i've always been -- >> mastercard did get an upgrade. >> yes. >> rbc, top pick. >> i thought that was interesting. i regarded charlie as being one of the great guys -- >> but that backs up the notion it's a department store distribution channel story and not a broad consumer story. >> yes, i think that's what's important. that's what pvh would say, what the autos would say. i have to tell you i think that these hearings -- i mean, i'm just seeing -- i'm talking about the velocity of change that has to happen very quickly. that has kept a lot of stocks up.

>> do you think the market runs out of patience? when does something have to get written or signed before the market says we don't know if it's going to happen at all, do you know what i mean? >> let's say you're thinking about taxes and you're thinking about holding off selling. well, maybe you get a ret retroactive tax, you don't know when your taxes are going to go down for capital gains. >> talking about capital gains, yeah. >> i'm saying there's a lot more in the air today. i see tech doing better, but i think tech does better because it grows well in a time when people think that the economy's slowing. that's not been part of the thesis, the economy's slowing. but obviously people are looking at macy's and they're looking at kohl's and saying, listen, people aren't shopping. >> that's not right. >> i think that's the wrong conclusion. market could be making some wrong conclusions driven by this rth by the etf driving all retail down. >> interestingly info tech as a sector has the lowest number of negative preannouncements in about six years. >> isn't that something? >> yeah. only a little more than a dozen

tech companies have warned on q-4. now, that could change in the coming days. >> right. i had mind body on last night that rang the bell at the nasdaq. wow, they're just growing like mad. there's a meeting next week that's cloud based, going to be really terrific. salesforce stock has had several good days after spiking from 70 to 77 when they announced that good quarter and went down to 67. i think salesforce is worth noting as starting to get some buyers. by the way, service down had buyers yesterday. these are all uber cloud plays. >> right. i wanted to come back to you on your question on qualcomm and nxpi. >> yeah, do you have something? >> apparently through the wonders of e-mail it needs the approval of the antitrust regulator in china. >> i was thinking you're going to go there. >> and the concerns about our country's relationship with china, particularly under a trump administration seem to have a lot of at least those investors who invest in these takeover situations concerned enough to say maybe that can be

something bad. >> that is exactly where i wanted to go, but i didn't want -- i have no confirmation on it, but i think you're absolutely right. >> that's the -- from those who play these things. that may be why you see a larger than expected spread there. and china does figure prominently into a lot of our deals as we do their deals even though it seems it shouldn't be. >> monster breakup fee doesn't go through. again, going back to the idea of retail. look at amazon, look at fang today, but look at amazon. amazon stock is saying this is a redistribution. it is not saying that retail's weak. i think that's important. >> right. >> mccain has wrapped up his opening statement. in one line he says, the goal of this review as i understand it is not to question the outcome of the presidential election. as we get closer to clapper's testimony we'll take you to washington, but first bob's on the floor. good morning, bob. >> hey, carl. mixed open. obviously consumer discretionary being hurt by macy's and kohl's. let's look at the sectors right

now. energy's on the upside because oil is up here today. health care, materials either side of positive or negative and consumer discretionary a little weak. look at the dow movers, you can see the impact of kohl's and macy's commentary because general weakness in walmart, nike, home depot, more retail oriented group, chevron on the upside. travelers got a downgrade from morgan stanley this morning and that's hurting the dow as well. the retail stocks understandably all to the downside. important note, remember l brands also lowered its outlook for the final quarter of 2016. they're talking about the low end of the previous guidance, so that's an additional problem for the market overall. it's important macy's very specifically called out weakness in handbags and watches impacting the results. and you can see the impact on some of the companies that are in this space as well, michael kors for example, kate spade, movado all noticeably on the weak side.

there's an etf for that xrt. you can see how volatile it has been moving about a 25%, 30% range throughout 2016. that's xrt there. and of course the problems for the department stores we've chewed over endlessly at this point besides the traffic declines, the losses to the offprice competitors, faster fashion chain supply chains from other competitors and of course the shift to online sales. not a lot of upgrades and downgrades so far in 2017, but a couple in the airlines. remember, cowen downgraded the airlines yesterday. today morgan stanley upgraded one of them, that's love, southwest, downgraded ual. cowen did that yesterday. you can see mixed picture here. airlines generally held up very well yesterday on the cowen downgrade. two groups who have done very well this year, a little bit mixed today. metals and steel. freeport, alcoa have had double digit gains this year. they're on the mixed side today. steel stocks had a great day yesterday. so u.s. steel, ak steel were up strongly as well. those stocks are basically flat today but some big, big moves up

in some of those steel stocks yesterday. finally, energy stocks had a great start to the year. some of the drillers look noble, parker, pkd did really well. they are unchanged but they had double digit gains earlier in the first two days, whiting another one of the companies as well doing fairly well. guys, back to you. >> bob, thank you very much. let's get to the bond pits, rick santelli at the cme in chicago. hey, rick. >> good morning, carl. very interesting day today. let's do a couple of pairings, shall we? let's pair tens and bunds. let's look at a two-day of tens. see the pattern we're giving up ground. as a matter of fact this could be the close that closes below where we closed at the end of last year, 2.445 round up any way you want. look at a two-day bund. going in a different direction. december 1st chart, let's look at our tens. definitely starting to give up some ground looking a little toppy. look at bunds, exactly the opposite. which means the spread should be narrowing and indeed if you look

at a november start of tens minus bunds, 213 roughly is the difference. it is definitely starting to go the other way. why is this significant? we have policy diverging. isn't it just a matter of time? and who's policy is going to lead whose? mario draghi and abeconomics going to have more of a pull, or janet yellen more of a pull, i would certainly think it would be the latter. and what happens when rates go up? the currency usually outperforms. look at a two day euro versus the dollar. dollar index just now broke on an intraday basis under 1.02. it settled last year 1.0221, the dollar has led the charge in both directions. so maybe this is a short term top whether it's rates in the dollar. and finally, i'm not going to show you any charts, but for weeks, months, i've been getting borrowing rates in china,

three-month, six-month, now it's overnight and it started with longer term and now it's moving to shorter term. these rates are popping big time. that's reversing the dollar's stngth against the yuan. very significant. especially think about the policies of the president-elect coming into office. carl, back to you. >> all right, rick. we'll talk to you in a bit. rick santelli in chicago. we are monitoring this hearing on foreign cyber threats. of course we'll bring you that live and any headlines as they come. in the meantime dow's not doing much down five points, moved lower by travelers and walmart. back in a moment.

live picture of this senate hearing on foreign cyber threats on capitol hill. we are awaiting james clapper, the director of national intelligence, although reuters is running some headlines the testimony apparently the intelligence chiefs will call russia, quote, a full scope cyber actor, which poses a, quote, major threat to u.s. government, military, diplomacy,

commercial and critical infrastructure. they go onto say that russian actors, in their words, have seeded false information into social media in an attempt to sow doubt and confusion and try to weaken western governments. let's listen to clapper. >> some brief recommendations and a few parting observations. i certainly want to take note of and thank the members of the committee who are engaged on this issue and have spoken to it publicly. i know there is a great interest in the issue of russian interference in our electoral process based on the many classified briefings the intelligence community has already provided on this topic to the congress. secretary of homeland security jeh johnson and i have issued statements about it. the joint analysis report that you alluded to publicly issued by department of homeland security and the federal bureau of investigation provided details on the tools

infrastructure used by the russian intelligence services to compromise infrastructure associated with the election. as well as a range of u.s. government, political and private equities as you described. as you noted the president tasked intelligence community to provide a comprehensive report. we plan to brief the congress and release an unclassified version of this report to the public early next week with due deference to the protection of highly sensitive and fragile sources and methods. but until then we're really not prepared to discuss this beyond standing by our earlier statements. we are prepared to talk about other aspects of the russian cyber threat. we also see cyber threats challenging public trust and confidence in information services and institutions. russia has clearly assumed an even more aggressive cyber posture by increasing cyber

espionage operations leaking ka da ta stolen from these operations and targeting critical infrastructure systems. china continues to succeed in conducting cyber espionage against the u.s. government, our allies and u.s. companies. intelligence community and the security experts however have deserved some reduction in cyber activity from china against the bilateral 2015 commitment to refrain from espionage for commercial gain. iran and north korea continue to improve their capabilities to launch disruptive or destructive cyber attacks to support their political objectives. non-state actors, notably terrorist groups, most especially including isil also continue to use the internet to organize, recruit, spread propaganda, raise funds, collect intelligence, inspire action by

disciples and coordinate operations. so in this regard i want to foot stomp a few points that i've made here before. rapidly advancing commercial encryption capabilities have had profound effects on our ability to detect terrorists and their activities. we need to strengthen the partnership between government and industry and find the right balance to enable the intelligence community and law enforcement both to operate as well as to continue to respect the rights to privacy. cyber operations can also be a means to change, manipulate or falsify electronic data or information to compromise its integrity. cyberspace can be an ecochamber in which information ideas, beliefs true or false get amly -- amplified or reinforced through constant repetition. all these types of cyber operations have the power to

chip away at public trust and confidence in our information, services and institutions. by way of some observations and recommendations, both the government and private sector have done a lot to improve cyber security and our collective security is better, but it's still not good enough. our federal partners are stepping up their efforts with the private sector but sharing what they have remains uneven. i think the private sector needs to up its game on cyber security and not just wait for the government to provide perfect warning or magic solution. we need to influence international behavior in cyberspace. this means pursuing more global diplomatic efforts to promulgate norms of behavior in peacetime and to explore setting limits on cyber operations against certain targets. when something major happens in cyberspace, our automatic default policy position should not be exclusively to counter

cyber with cyber. we should consider all instruments of national power. and most cases to date non-cyber tools have been more effective at changing our adversaries' cyber behavior. when we do choose to act, we need to model the rules we want others to follow since our actions set precedence. we also need to be prepared for adversary retaliation, which may not be as surgical either due to the adversary's skill or inherent difficulty in calibrating effect and impact of cyber tools. that's why using cyber to counter cyber attacks risks unintended consequences. we currently cannot put a lot of stock, at least in my mind, in cyber deterrence. unlike nuclear weapons, cyber capabilities are difficult to see and evaluate and are ephemer ephemeral. very hard to create the substance and psychology of deterrence in my view. we also have to take some steps

now to invest in the future. we need to rebuild a trusted working relationships with industry and the private sector on specific issues like encryption and the roles and responsibilities for government, users and industry. i believe we need to separate nsa and cyber com. we should discontinue the temporary duel head arrangement which i helped design when i was head of intelligence several years ago. this isn't purely a military issue. i don't believe it is an nsa's or the i.c.'s long term best interests to continue the duel hat setup. third, we must hire, train and retain enough cyber talent and appropriately fuse cyber as a whole of i.c. workforce. clearly cyber will be a challenge for the u.s., the intelligence community and our national security for the foreseeable future. and we need to be prepared for that. adversaries are pushing the

envelope. since this is a tool that doesn't cost much and sometimes is hard to attribute. i certainly appreciate as we all do the committee's interest in this difficult and important challenge. i'll wrap up by saying after 53 years in the intelligence business in one capacity or another, happily i just got 15 days left. i will miss being involved in the intelligence mission. and i will most certainly miss the talented and dedicated patriots who are in the united states intelligence community. i'm very proud of the community of professionals i've represented here for the last six and a half years who don't get much public recognition and who like it that way. they've always supported me and i'm confident they will do no less for my successor whoever that turns out to be. so let me -- with that let me stop and pass to admiral rogers. >> thank you, general. admiral rogers. >> chairman mccain, ranking

member reed, ranking members of the committee, good morning. thank you for the opportunity to appear before the committee today on behalf of the united states cyber command and the national security agency. i'm honored to appear besides director clapper and undersecretary let ra and i applaud them both for their many years of public service. it's been a true honor, gentlemen. when we last met in september i discussed the changing cyber threat environment and look forward to discussing the issue. of course some aspects must remain classified to protect our nation's security. so today i will limit my discussion to those in the public domain. we have seen over the course of the last year how this cyber threat environment is constantly evolving. we have all come to take for granted the interconnectivity that is being built into every facet of our lives. it creates opportunities and vulnerabilities. those who would seek to harm our fellow americans and our nation utilize the same internet, the same communications devices and the same social media platforms

that we, our families and our friends here and around the world use. we must keep pace with such changes in order to provide policymakers and our operational commanders the intelligence and cyber capabilities they need to keep us safe. that means understanding our adversaries to the best of our ability and understanding what they mean to do and why. we're watching sophisticated adversaries involved in criminal behavior, terrorism planning, malicious cyber activities and even outright cyber attacks. while this is a global problem, we have also recently witnessed the use of these tactics here at home. the statement for the record that we have provided jointly to this committee covers the threat picture worldwide. but i know this hearing today will inevitably focus on reports of interference in our recent elections. i echo director clapper in saying that we will await the findings of the just-completed intelligence review ordered by the president and defer our comments on its specifics until after that review is shared with our leaders and congressional

overseers. i do want to add, however, that over this last year nsa and cyber command have worked extensively with our broader government partners to detect and monitor russian cyber activity. the hacking of organizations and systems belonging to our election process is of great concern. and we'll continue to focus strongly on this activity. for nsa part we focus on the threat in foreign spaces but share our information as readily as possible with the rest of our partners in the department of defense, the intelligence community and federal law enforcement as well as others within the u.s. government and the private sector. as you know, russian cyber groups have a history of aggressively hacking into other countries' government infrastructure and even election systems. as i've indicated, this will remain a top pry u priority for nsa and cyber command. in this changing threat environment i would like to take this opportunity to emphasize the importance of improving cyber security and working related issues across public and private sectors. we continue to engage with our

partners around the world on what is acceptable and unacceptable behavior in cyberspa cyberspace. we are clearly not where we want to be nor where we need to be in this regard. we continue to make investments in technologies and capabilities to improve detection of malicious cyber activities and make it more difficult for malicious cyber actors intended to do us harm. combatting cyber threats take more than technology. it takes talented, motivated people. we are investing more than ever in the recruitment and retention of a skilled workforce that is knowledgeable, passionate and dedicated to protecting a nation for the safety of our citizens and of our friends and allies around the world. innovation is one of the key tenants of nsa and cyber command and we need to reinvigorate the cyber workforce to create challenges -- this remains a key driver and a key challenge as we look to the future. cyber command is well along and building our cyber mission force deploying teams to defend the

vital networks that support d.o.d. operations, to support combatant commanders in their missions worldwide and to bolster d.o.d.'s capacity and capabilities to defend the nation against cyber attacks of significant consequence. the organizations i lead u.s. cyber command and the national security agency, have provided intelligence, expert advice and tailored options to the nation's decision makers in response to recent events. much of their activity can only be discussed in classified channels, but i must say i'm proud of what both organizations have accomplished and will accomplish. even as we acknowledge we have to do more. i look forward to your questions. and finally on one personal note, i apologize to all of you, i have an ongoing back issue, if i have to stand up throughout this, please don't take that as a sign of disrespect anyway. i guess i'm just getting older. that's all i have for you, sir. >> i know how you feel.

director, i just have to -- general clapper, i just have to mention the name mr. assange has popped up. and i believe that he is the one who's responsible for publishing names of individuals that work for us that put their lives in direct danger, is that correct? >> yes, he has. >> and do you think that there's any credibility we should attach to this individual given his record of -- >> not in my view. >> not in your view. >> admiral rogers? >> i second those comments. >> thank you. for the record, on october 7th, the homeland security and office of director of national intelligen intelligence, their assessment was that u.s. intelligence

community is confident that the russian government directed their recent compromise of e-mails from u.s. persons and institutions including from u.s. political organizations. goes onto say these thefts and disclosures are intended to interfere with u.s. election process, quote, such activity is not new to moscow. russians have used similar tactics and techniques across europe and eurasia. based on the scope and sensitivity of these efforts that not only russia's senior most officials could have authorized these activities. general clapper, those are still operable and correct statements? >> yes, chairman mccain, they are. as i indicated in my statement, we stand -- actually, more resolutely on the strength of that statement that we made on the seventh of october. >> i thank you. so really what we're talking

about is if they succeeded in changing the results of an election, which none of us believe they were, that would have to constitute an attack on the united states of america because of the effects if they had succeeded. would you agree with that? >> first, we cannot say they did not change any vote tallies or anything of that sort -- >> i'm just talking about -- >> we have no way of gauging the impact that certainly intelligence community can't gauge the impact it had on choices the electorate made. there's no way for us to gauge that. whether or not that constitutes an act of war is a very heavy policy call that i don't believe the intelligence community should make. but it's certainly would carry in my view great gravity.

>> thank you. admiral rogers, have you seen this problem in your position getting worse or better? in other words, it's my information that their techniques have improved, their capabilities have improved, the degree of success has improved, is that your assessment? >> so i publicly said before that the russians are a pure competitor in cyber. if you look broadly beyond the russians to cyber at large, the level of capability and nation states and actors around the world continues to increase. i can't think of a single significant actor out there who's either decreasing their level of investment, getting worse in their trade, craft or capability orn any way backing away from significant investments in cyber. >> and with all due respect to you, mr. secretary, i have not seen a policy. in other words, i don't think any of our intelligence people know what to do if there is an

attack besides report it. i don't think that any of our people know if they see an attack coming what specific actions should be taken. maybe i'm missing something. but i've asked time after time, what do you do in the case of an attack? and there's not been an answer. there's not been an answer. and i believe that unless we have specific instructions to these wonderful men and women doing all this work, then we're going to be bystanders and observers. i'm glad to hear you respond to that. >> mr. chairman, you're right that we have a lot more work to do to put the right deterrence and response framework in place on cyber. this is somewhat of a new domain of operations and in some cases warfare. and in my personal opinion the next administration would be well served to focus very early

on those questions of continuing to develop our overarching policy, a comprehensive approach and increasingly robust and refined deterrence framework. >> thank you. finally, director and admiral, would it make your job easier if you didn't have to report to seven different committees? >> um, senator mccain, my hands have been slapped before when i ventured into the delicate area of congressional jurisdiction -- >> even in the last -- >> being 15 days in office, i don't think i'm going to speak to that. afterwards might be different. >> well, we look forward to calling you back. [ laughter ] admiral rogers. >> can i second the comments of the director of national intelligence? >> but it does make it difficult, doesn't it? it's not exactly stovepiping,

but overlapping jurisdictions i think makes your job a little harder, doesn't it, in all candor, admiral? >> the way i would phrase it is i think clearly an integrated approach is a key component of our ability to move ahead here. i would say that in the government, in the private sector there's no particular one slice where that's not applicable. >> thank you. senator reed. >> thank you very much, mr. chairman. general, you responded to the chairman that in october you and the -- concluded that the russian government intervened in the election and admiral rogers also seconded that view -- >> you're watching jack reed there talk to james clapper, director of national intelligence on the senate hearing on foreign cyber threats. clapper with 15 days left as he pointed out in office, said he wanted to foot stomp a few points, namely russia, they say, is a full scope cyber actor that tried to seed false information

into social media, try to weaken western governments. they go onto say russia poses a major threat to the government, u.s. infrastructure, diplomacy, military. we're keeping an eye on that. meanwhile at the top of the hour we got ism, 57.2 just above expectations. a lot to work with today, guys. cramer's point a few moments ago was although this is not purely a business story, the notion that some senators would use it to express independence from trump might delay the agenda on which the stock market is valued right now. >> good point. because it is that pro growth agenda mix of corporate tax cuts and reform, infrastructure spending. we're going to talk to mi amc guinness about that and where fiscal responsibility is. and of course fueling stock market the dow is down only two points recovered lost ground earlier after two strong days to start the year. let's get back to this top story. want to bring in the former u.s. assistant attorney general for

national security john carlin with us who ran the cyber security division. couldn't ask for a better guest today to comment on these hearings. welcome, john. good to see you. >> good morning. glad to be here. >> so based on what we've heard so far and carl just gave a pretty nice recap, overall headline here is that the intelligence chiefs are calling russia a major full scope cyber actor. your reaction as to how this is going to go down with donald trump and on capitol hill. >> well, i don't comment so much on the politics, but i'll say for all of your business viewers out there, this is an important day. it's an important hearing. and it's an important moment as we head into a new administration. because it's not just russia, but when we talk about the cyber threats posed by national security actors, they are a full scope threat kroacross the specm to every business, small, medium and large. and those who move quickly to figure out how to mitigate risk,

how they're going to work with government in the case of an attack and how the government is going to respond and impose deterrence or costs on those who would attack their companies, is going to be vital to determining next year and the years to come winners and losers in the business world. we are at a critical moment, an inflection point. everything we value we have moved from analog to digital space. and connected to the internet. and what you're hearing today from the top professionals in the intelligence community and in military and from the republican chair and the democratic ranking is that we're vulnerable. we haven't made the investments we need to respond to that threat. >> i know you worked closely on this very issue. i mentioned you just stepped down in september. and one of your legacies is that you famously initiated the first case combining charges of hacking and terrorism as it related to the chinese military, i believe. what did you learn in that experience that's relevant to today's hearing and the question about russian hacking -- alleged

russian hacking into the u.s. election? >> yeah, let me distinguish two cases i think you're referencing there. one was the first case, and this was against five members of the people's liberation army, unit 61398. what we saw there is this was a group, and this was the military, this was their day job, every day they got up in uniform at 9:00 beijing time and attacked a full range of u.s. companies from nuclear to solar to steel. and they also attacked both labor and management side. and i know that one thing the president-elect has placed a big premium on is making sure that we have fair trade. well, it's not fair if a foreign adversary is using the second largest army in the world to steel day in and day out what our research and development produced. and it means they were investing in stealing instead of developing r & d. and what we showed i think in that case which were criminal charges against specific actors by name, by face, in uniform, was that number one, we can figure out who did it, it may be hard in cyber, but it's not

impossible. number two, we're willing to make it public. and number three, that we're willing to impose consequences. in that case it came in the form of a criminal indictment. i think what you showed there is when we did that, combined with other actions and showed that there are consequences, behavior changed. you are not seeing the same type of activity across the board from chinese military actors against u.s. companies. and we need to make those changes because it's not a fair fight otherwise for companies. the other case that you reference, which was the first case of someone charged with both terrorism and cyber hacking is a wakeup call to every retailer, every company out there in the united states. because this was an individual who stole what looked like a relatively small amount of personal identifiable information, names, addresses. most companies today try to handle that in-house and don't tell anyone. in this case if they had done that, what they never would have found out is the guy on the other end wasn't some low level crook. instead, it was someone who in malaysia was hooked up with one of the most notorious terrorists in the world at the time who was

located in raqqah, syria, at the heart of the islamic state and they were converting that stolen information from a trusted mainstream retailer into a kill list then they were using twitter to push back to the united states saying kill these people, by name, by address, with information we took from a u.s. company, from u.s. retailer, kill them. so it can have literally life and death consequences. and what i'm afraid to say, but is true and is why it's so important that we focus on this is we are just at the beginning of adversaries across the world, be that nation states or crooks, and you heard this from admiral rogers in the hearing today. their capacity just continues to improve. so we need to keep pace with that. >> so when it comes to u.s. response, clapper made the point that it's not effective to fight cyber with cyber. but any responses come with complications because it's going to come back to us somehow. and in his view it won't necessarily be surgical. so what is a legitimate u.s.

response? >> that's a great question. i think what you've seen us try to use is an all-tools approach. meaning just because they attack in cyber doesn't mean we respond in cyber. all tools can range from consequences in the form of a criminal case, so real people getting arrested, being extradited, brought to the u.s., facing real criminal time. that includes that terrorist who's doing over 20 years, someone who committed intellectual property theft who's doing over five years who stole information from boeing. it also includes the use of sanctions. you saw the president sign sanctions against the north korean actors against sony and the new executive order recently changed on december 29th to include meddling with an election essentially, used with over 11 actors from russia. so the use of sanctions. you also saw with russia, and this was combined with some other activity that 35 intelligence operatives were thrown out of the united states. and for the first time in our history two facilities that were owned and operated by russia and

used for intelligence purposes were closed down inside the united states. and you saw the public release of formally classified information that allowed people around the world to detect russian malware on their systems. so i think we need to be created in our tools. we are just at the beginning to develop this tool set and many of them relevant for businesses are going to be tools with economic consequences, be it treasury department sanctions or for instance the commerce department designating certain entities as ones you can't do business with without a license because they're bad cyber actors. >> john, why do you think the president-elect refuses to accept the consensus among the intelligence community of this country? >> well, i know that -- again, i won't speak for the president-elect. i know he's anticipating getting a briefing tomorrow. and that will be at the highest classification level to see what it is that they base their opinion on. i think he'll -- once he's in, he'll continue to get briefings and his team will on what we're able -- the intelligence folks

are able to see. they're doing outstanding work the intelligence agencies both human operatives, law enforcement, those collecting signals intelligence. we can't see everything, but they do a phenomenal job now of figuring out exactly who did it. i think many people operate under the assumption that, oh, it's cyber, we'll never be able to figure out who did it. that's why you've seen us now take public actions against north korea, against iranian actors, against chinese actors, now russian actors, against terrorist groups to show, no, we can figure it out. i think once he and his team get fully informed and briefed, it's vital that they tackle this important issue. >> we'll see his response after that briefing and be checking twitter, i guess. john, thank you for joining us on today's important story. john carlin, former assistant attorney general at the u.s. department of justice. >> thank you. when we come back, of course a lot more from the senate armed services committee hearing holding that hearing on foreign cyber threats to the u.s. meanwhile, dow remains in an extremely muted range down five

points. travelers and walmart the laggards on this tough day for retail. a lot more on that after a break.

retailers getting slammed today, macy's and kohl's both falling after reporting disappointing holiday sales numbers. our courtney reagan joins us this morning with a day with a lot of retail news. hey, court. >> hi, carl. the thing is the consumer seems to be very strong by economic standards and mastercard says retail spending through christmas eve was up 4%. but it doesn't look like shoppers were spending more of those dollars at macy's and kohl's this time around. both of the department store retailers reported that comparable store sales for november and december fell 2%. as a result both lowered the full year earnings guidance as well. shares are down sharply for macy's and kohl's but so is the whole department store sector being dragged down by what we heard from those two. macy's now expecting 2017 comp sales will continue the trend we saw in the holiday season, so that's concerning going forward. kohl's says that gross margin is going to be lower than planned in part due to those higher level of promotions and when the

sales occurred. the ceo actually called the holiday season volatile saying it was strong for black friday, strong towards the end but weak in early november and december. macy's also announced a restructuring effort, cutting more than 10,000 jobs, 6,200 corporate, 3,900 store associates most at the 68 stores that will close this year of the planned 100 store closures that we heard about in august. now, i spoke to macy's ceo terry lundgren on the phone. he said he's disappointed. he said we thought a strong thanksgiving weekend would continue through d start off st the momentum did not materialize for the entire holiday period. regarding the restructuring in real estate upgrades, lundgren said we don't standby and do nothing, when we're challenged we take action. more and more sales are going online. lundgren admitted this. his sales were up double digits online. adobe just now coming out with new numbers saying online sales were up 11% for the total holiday season, had initially planned. and slice intelligence data that

scans e-mail receipts show that amazon took 38% market share during the holiday season when it comes to online shopping, carl. >> courtney, what's interesting also about macy's is they're on the brink of a management transition with terry lundgren been there forever considered the best in the business, about to hand over the raieins, is the any indication of a timeframe of how long -- >> sara, exactly, you're right -- >> it's moving very quickly. the sands are shifting beneath them faster than they anticipated. >> yes, that's right. i'm sorry, you cut out briefly, forgive me if i didn't answer your whole question. jeff gannett is looking to take over here for terry lundgren in the first quarter. he's been there at macy's for a very long time himself. so he certainly understands the current strategy. and many analysts say, look, macy's is doing what it thinks is best. it's trying a lot of different things to give value back to the

shareholder including all of the restructuring and real estate transactions. but as far as what mr. gannett will doing e do going forward, we don't exactly know yet. hopefully he will do something that moves the company forward. and somehow brings that balance back to the stores. while also strengthening online if that's indeed where the shopper wants to go. but we know when stores close in an area, you also actually see an e-commerce impact, a decline. because many shoppers may shop online but feel more comfortable returning to the store. so that's a very delicate balance that a store like macy's has to figure out going forward. >> courtney, thank you. on the retail story. we'll see how long it takes if they can figure it out. our courtney reagan. let's send it out to julia boorstin joining us now from the show floor at ces with aol ceo tim armstrong. julia. >> sara, thanks so much. jim, thanks for joining us. before we get into the ces, we have to talk about hacking. of course we've been watching the hearing on cyber hacking

this morning and hacking is a topic of great interest to aol and parent company verizon in the process of acquiring yahoo. are you going to try to get out of that yahoo acquisition because of that hack? >> what i would first say is we live in a security sensitive world now and something we care about, verizon cares about, i would say on the yahoo front we have done two things, during q-4 and q-3 time period of 2016 did a great job of planning strategy with them, that remains on track. the hacking is that came out of yahoo and breached news is something that verizon and the general counsel of verizon is dealing directly with yahoo on and the yahoo board. i remain hopeful the deal will close. and i think we'll see what the outcomes are of the ongoing investigations in the meantime. >> what kind of discount do you think verizon should get? >> i wouldn't comment on anything related to the deal itself in particular because i think our focus area right now is making sure the culture and

the teams work well together in terms of potential integration. and the second piece is really yahoo's doing their investigation, so we don't have enough information to comment on it at this point. and when we have the information and yahoo has the information, i'm sure we'll come back on and talk to you about it. >> and at this point what are the chances are that the deal closes? >> you know, i think we're in a position where we are 20/20 goals are really clear, we want to get to billions of consumers, yahoo is one step in that process. i'm hopeful the deal will go through. i try to stay very positive that it will go through. i think as the investigation comes through both on the yahoo side and the verizon side, you know, we'll have more comments to make about it at that time. >> here at ces you're announcing some new tools that leverage verizon data for aol advertising. >> first of all, this is probably the seventh or eighth year we've been together at the kickoff to ces. this is our super bowl week. we're the digital media partner for ces. our mission is build brands

people love. probably most important week for us in the year in terms of technology and the announcements we make. and we're basically you've seen all the news around our industry about fake news and problems in advertising with transparency. today we're announcing the brand builder suite, which is our ad system which will allow brands to both find new customers and convert new customers in a brand safe environment. we're really excited about being here announcing that news today. and then the most important thing related to verizon is the verizon data. you know, 100% of the advertising industry is now moving towards software driven data targeted advertising. our relationship with verizon gives us a new differentiated approach in that environment. and, you know, if you're a customer of ours and you want mobile consumers, which everybody wants, we are uniquely positioned with verizon to bring aol ad systems and verizon data together to do really differentiated business in the advertising world. >> there have been some of your reports of fraudulent numbers,

mismeasurement, bots creating fake views, is digital advertising justin herntinherene with these? >> start from a human perspective, humans don't like fake news and advertisers don't like fake impressions. a year ago we recognized this was the trend in advertising. about six or seven years ago we recognized this was a potential problem in content. so we invested in really solid high quality editorial brands like tech crunch and "the huffington post" and gadget, on that side we have safe content. on the other side we basically clear all of our inventory now to remove any fraudulent inventory. so we feel like we have a brand safe environment both for consumers and for advertisers. so it almost highlights our business strategy. may be negative for parts of the industry, it's a huge positive for us as a company. >> you mentioned having post president-elect trump tweeted again this morning about dishonest media. "the huffington post" has taken a very adversarial stance against trump.

has it been good or bad for business? >> well, i think "the huffington post" has done an amazing job of doing something that i think trump has leaned into, which is having a direct relationship with consumers. so "the huffington post" was really the fist ground breaking property to allow people like president trump or president obama to directly communicate with consumers with an editorial voice around it. so i think from our standpoint our coverage of "the huffington post" and we just hired a new editor and chief coming from "new york times," i think we'll have a relationship with our consumers which is honest and direct about the political landscape, but also we're going to continue to open up the properties to allow people like we do with blogging to more directly interact with our consumers. so i think the presidential election highlighted our strategy again about being open and allowing people to directly communicate and debate issues and that's what we want. >> hey, tim, it's david faber back here at hq. verizon's chief competitor, at&t of course, has made an enormous bet on content.

you've been talking about your content assets. but people look at them and say, well, there's no real comparison to what time warner represents. is it robust enough in terms of an offering that you have now, or does verizon continue to need to invest? and would it ever consider doing something of a much larger scale? >> well, first, david, great to hear your voice from new york. >> thank you. >> and i think you hit on something that's really, really critical which is if you look at what's happened since we did the verizon deal, you've seen major followon deals. i think the at&t deal is a prime example of that where people have recognized that distribution and content work very well together. you know, you can look at the strategies as going in different directions if at&t's been leaning into direct and time warner and we're leaning into the digital, you know, world in general, if you look at our statistics from the second half of the, or all of 2016, you'd say mobile, mobile video and the access to digital consumers is

really important. and verizon's been very aggressive in this space both on the fios side and also on go 90 and with aol and potentially with yahoo. so if you look forward five years from now, i don't know whether or not you'd have that debate. you might say, hey, verizon's done a really good job of looking forward, you know, five, ten years in the future. and really verizon has a long history of doing that really successfully. and you've seen that in the build out of their wireless business. i think you're going to see that with verizon going forward. look, i came from time warner. i think jeff bewkes did a great job there. i have a lot of respect for randall at at&t, but i think verizon's strategy and what has been done at verizon has been really kind of visionary for where digital's going. i think you'll see verizon continue to build out that strategy. i just went to the kickoff meeting this week, i think verizon's a very well executing very focused company. love what's happening in the industry because i think it's a total validation of what we did

together with verizon, you know, 18 months ago. >> unfortunately we're out of time. tim, thanks so much for joining us. we really appreciate itd. carl, back to you. >> thank you so much, julia boorstin. let's get to sue herera this morning get a cnbc news update this hour. hi, sue. >> hi, carl. good morning everybody. here's what's happening at this hour, at least nine people were killed after a car bomb tore through a baghdad neighborhood today. at least 15 were wounded. the car was parked near an outdoor fruit and vegetable market in a mostly shiite neighborhood. turkish police have conducted more raids in their hunt for the gunmen who killed 39 people at an istanbul nightclub on new year's day. the anti-terrorism teams acting on tips made the raids on the outskirts of the city arresting several possible suspects. a recall to tell you about, mercedes benz is recalling nearly 48,000 suvs in the u.s. to fix a sensor problem that could stop the front passenger airbag from inflating in a crash. the recall covers certain models from the years 2016 and the new 2017 models.

and hawaii's kilauea continues to put on a show. this video was shot on tuesday and you can see lava streaming into the ocean as those huge plumes of steam rise into the air. that's the news update this hour. let's send it over to jackie deangelis for the eia inventory report. >> good morning, thanks so much, sue. you can see natural gas prices have reversed course. they're now in negative territory after the eia came out with weekly natural gas storage report a drawdown of 49bcf. compare this to what we saw last week, that megadraw of 237 billion cubic feet, you can see why people are not really buying into this. remember, nat gas prices on last week's number went all the way up very close to $4. they've been selling off this week. but this is a temperamental trade. right now weather models are telling us we're going to see more mild temperatures than expected. if we don't, it could shoot back up again. we have gotten through the 50-day moving average here. that was a key support level. the next support of course is at

$3. back over to you guys. >> jackie, thank you very much for that. jackie deangelis. when we come back, we're going to watch the dow down 15 and obviously a lot more as clapper continues to testify in front of the senate armed services committee. more "squawk on the street" in just a moment.

president-elect donald trump keeping up the pressure on obamacare on congress. the president-elect taking to twitter this morning calling senate minority leader chuck schumer a clown, saying it's time for republicans and democrats to get together and come up with a health care plan that really works. much less expensive and far better, exclamation point. senator schumer responding to the president-elect earlier this hour, listen. >> we understand that president-elect trump is in a difficult spot, that republicans are in a difficult spot. they want to repeal aca and have no idea how to replace it. but instead of calling names, president-elect should roll up

his sleeves and show us a replacement plan. >> a new report from the committee for a responsible federal budget suggests that a full repeal of obamacare could cost as much as $350 billion. joining us now to explain that the cfrb president mi mia mcguinness. thank you for joining us. >> nice to be here. >> all we hear about is how expensive obamacare is for consumers and insurers and the government. >> that's right. so, well, whether you liked it or didn't like it, one of the things about obamacare is that it was paid for when it was put in place. so repealing it we would save a lot of money by savings coming from getting rid of the coverage provisions that are part of the bill. but we would also lose a lot of money because in the bill there's also a good deal of savings that comes from higher revenues, taxes and from medicare savings. so if we go ahead and repeal it in full, by our estimates that's

going to cost $350 billion at a time that we really can't afford to be adding anything to the debt. now, there are other ways to look at how we're going to repeal it and replace it. you could repeal part of it. some of the more costly parts, the coverage provisions. but keep in place some of the things, for instance the medicare savings. republicans have been talking about doing that, but we still don't have a plan for what they would replace it with. and as much as you could generate in savings from repealing the coverage provisions and other parts somewhere between $300 billion and $700 billion, that's not going to be enough to pay for the replacement. so what i worry about is we're looking at something that could add to the debt at a time we can't afford that. >> it's true we don't know exactly what a replacement would be, but some of the ideas that circulate on congress including -- include giving away tax credits to help individuals buy health care on the market. do you support that idea? >> that can work certainly. the question is how generous they'll be, who they'll be targeted at and what the overall cost would be.

there's a couple different pieces that really play into analyzing this. one, the overall cost of the bill, how much it would add or hopefully subtract to the debt. and two really importantly that shouldn't be lost in all this is what are we going to be doing to control cost of health care? when it comes to health care, you can have people paying for it through premiums, or you can have the government paying for it, people think they don't see the cost but they're still paying for it that way. the real objective in addition to keeping coverage for folks who need it is bringing the overall cost of health care down. and that has a lot to do with how we structure it and change incentives. that's why the details of these bills, the replacement bills are going to be so important in terms of overall costs. >> hey, maya, just a question on process here over the next few months. if there is a prolonged fight on aca, does that displace a meaningful discussion about tax reform or infrastructure or deregulation? how many runways can they have open at the same time? >> yeah, that's a great question because we're just back from the holidays. and in washington it already

feels like you are drinking from a fire hose. there's so much that is coming at members of congress just coming back in terms of policy. clearly the first priority is going to be aca repeal, obamacare repeal, but the question is what comes next? how do you replace it? what about the tax cuts? infrastructure spending, they've talked about wanting to do something on defense. by the way, all e as those bills are crafted all would add to the debt, but there's only so much bandwidth for dealing with these things. i do think health care reform and tax reform are likely to be the initial priorities for the next -- for the coming months. but it is going to be a busy time here in washington. and from our perspective we really have to be looking at the bottom line how it's going to be affecting the fiscal situation, the economic situation and therefore the kind of well being of american households. >> do you feel sort of sidelined on that front right now, maya? you used to have a lot of republicans on your side worried about blowing big holes in the deficit, but now fiscal stimulus

is very much in vogue and the current leader of the republican party wants to expand spending on roads and bridges, cut taxes across the board and repeal and replace obamacare. >> absolutely. i mean, i'm very worried about the fact right now our debt as a share of the economy is the highest it's been since world war ii. the new president is going to be inheriting a fiscal situation as judged by debt compared to the economy. that's the worst any president other than truman has walked into. and yet the policies he's put forth and seem to be supported by a lot of people would make the situation worse. so if we don't have an early course correction, this situation could get us to record levels of debt we've never seen in this country. and what that does is it slows the growth of the economy, it slows incomes, standard of living, job creation. it has profound effects. it's kind of the underpinning of a healthy economy. so the problem of course with fiscal responsibility is it's hard. it takes real policy choices. and everybody who when they have the majority come in they're

very excited to implement their agenda, less excited to pay for it. and we're going to need people who've talked about fiscal responsibility in the past to really stick to that and focus on how will this affect the debt otherwise we're going to harm the economy. >> just as interest rates have started rising in this country. maya, we'll leave it there. we'll talk to you again i'm sure about this critical issue. >> yes. thank you. as we go to break, take a look at stocks down 25 on the dow, 2 on the s&p. dollar index hits a session low down about 1%. back in a minute. trucinnt

one strategist thinks stocks are about to explode higher. find out what makes him so bullish on tradingnation.cnbc.com. more "squawk on the street" coming up.

now let's get to the cme group and join rick santelli who

gives us "the santelli exchange." rick. >> thanks, david. i'd like to welcome my guest this morning jay timmons. jay, i'm really excited to have you today because manufacturing's a big deal. we've had some strong manufacturing numbers. and as president and ceo of a national association of manufacturers, my guess is you know a little bit about this topic. so let's make it simple, tax reform, you know, the wild card is what rate gets legislated. but it's pretty easy. you know, if the corporate rate moves to 25% or 20% or zero, you can look at the dow and make some pretty good calculations, but regulations is a little cloudier. try to give me a handle on what type of savings manufacturers could be in for and which regulations over the years have they complained about the most. >> yeah. so let's take these one at a time, rick. tax reform is really doable right now. you have a congress and you have a president who are committed to

making our tax code much more competitive. when you see the president-elect talking about some of the disadvantages that american manufacturers have, it's because of those two issues. it's because they are better tax rates and tax structures in other countries. and there's a more balanced regulatory system in other countries. we've got to get back to the basics here and make sure american manufacturing is competitive. you talked about various rates, donald trump's talking about a 15% rate. we'd like to see us work toward that and see how fast and far we can go. not only for the c corp.s but also s corps. >> now, when it comes to the affordable care act, which has been getting a boat load of coverage of course. i don't know why it's a surprise. it's been a platform for several

elections. are there issues there regarding the mandate and benefits and part time and full time that will impact should it be repealed and replaced as advertised that will affect directly in the manufacturing arena? >> absolutely. you're right, health care itself, not just aca or obamacare, health care itself has been an issue in campaigns for as long as i can remember and that's because health care is costly. we have the best system in the world and we are creating cures for diseases like no other country. we should be proud of that fact. but at the same time we have to make sure that folks have access to not only affordable but quality health care. one of the promises of aca was that it would drive down the cost of providing health benefits for employees. that did not materialize in the least. in fact, i hear from a lot of my member companies that that rates have actually gone up 80%, 90% a year for small and medium sized manufacturers.

that's unacceptable. and we talked earlier about -- or you mentioned earl yier the regulatory burden. aca is part of that. if you look at the average manufacturer, they're paying $20,000 per employee per year for regulatory compliance costs. if you're a small manufacturer, you're going to be paying $35,000 per employee per year. that is unacceptable. so, as this new administration takes hold and gets its foot in the door, we're very hopeful that they're going to take a very strong look at the burden, the economic burden, that regulations place on businesses and businesses' ability to compete and succeed in this country. if we correct that problem, you're going see -- >> let me stop you. >> -- a lot of manufacturing. >> let me stop you there. in the last 40 seconds i have, can you give me an idea -- and this is key -- what kind of timeline do you think the manufacturers you deal with will give a new administration to start to implement or legislate these policies? is it going to be 50 or 100

days, then they're going to lose interest? is there a long-term view here? give me the final answer. >> look, they haven't lost interest in the last four decades, so i don't think they're going to lose interest now. maya mcginnis was your previous guest with carl. and she was talking about people running out of time and patience. i don't agree with her on that. manufacturers understand that there's a lot to do, but we also expect congress to get busy and get the job done. if we hear people saying, well, we'll put that off, we'll do that later, i think they do so at their own peril, electorally. >> got you. we're going to have to leave it there, jay. >> great to be with you. >> we look forward to the next time with you as well. next time you're in chicago, we'll do this face-to-face. >> sounds good. >> thank you, again. and the "squawk on the street" gang, back to you. >> all right. thank you very much, mr. santelli. ces kicking off its 50th annual consumer electronics show in los angeles and jon fortt is there with a look at what is coming up

on "squawk alley." jon? >> david, we're going to have the ceos of harman and mobile life for technology for driverless cars and the cars of the present as well. also, new advances in tvs making headlines last night. all that and more coming up on "squawk alley." david, back to you. >> all right. thank you very much, jon. looking forward to that. always love hearing about autonomous vehicles. let's look at the dow before we head you to break quickly. as you can see, we are in the red to the tune of about 35 points.

stocks are selling off here a bit. those are the s&p winners right now, alexion pharma moving on its own. but you see some of the miners like thank you monewmont mining. that's because gold prices are actually at a one-month high right now on the back of a weaker u.s. dollar. the dollar is actually at a three-week low when you look at the dollar index, so reversing some of the trade lately, david, that had been a super strong u.s. dollar. we're also seeing reversal in the trade in treasuries as well, buying today pushing yields lower. this is quite a move here, down 1.3%, and you can see it's

impacting some of the stocks -- >> and china, of course, has had a meaningful reversal, i guess, over the last couple days. >> china stepping in to strengthen their currency, contrary to what they've been accused of. >> by the president-elect. >> correct. and there's concern it's doing so to stem some of the outflows, the money pouring out of its economy, some liquidity fears and higher rates. so, it's certainly a risk to watch here, but it's having an impact overall, weakening the dollar, going against the trend. and we have seen the dollar and stocks moving hand in hand. that continues, both moving south today. coming up later on "the halftime report," don't miss this one. omega adviser ceo lee cooperman. his take on the markets, where to invest your money in the trump area and much more. the dow down about 31 points. stay with us.

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welcome back to "squawk on the street." i'm jackie deangelis reporting from the energy desk. we are waiting for the department of energy to release its crude inventories storage report. you can see crude oil prices have been supported this morning, trading just under $54 a barrel. actually, a session high today, $54.12. now, we got a big drawdown from the api last night, more than 7 million barrels. the expectations for the d.o.e. number a little bit more than 2 million barrels. that would be supportive of these prices.

we're also hearing that saudi arabia is cutting orders to customers. it's raising prices in an effort to continue to implement the opec pact as it moves forward. remember, you have a dollar index backing off today post fed minutes as well, dollar index at about 1.0150, supportive of crude prices, too. all of these elements are lifting us higher. the dow is lower but mixed action in energy stocks. halliburton and philips 66 is trading a little higher. at this point, crude trading $53.57. just waiting for the number to come out from the d.o. looks like it's down 7.50 million barrels, almost in line with the api from last night. you can see we're slightly off since i started this report but still supported here. carl, let's get over to you and "squawk alley." >> jackie deangelis, thank you. it is 8:00 a.m. at ces in las vegas, 11:00 a.m. on wall street, and "squawk alley" is live.