>> live from new york where business never sleeps, this is "squawk box." >> good morning, everybody. welcome to "squawk box" on cnbc. live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. let's look at how january finished for the markets. the nasdaq leading the way. it was up by 4.3%, just for the month. the dow was up by a half percent. the s&p was up by 1.8% this comes after a mixed day yesterday. you saw that the dow was down by just over 100 points. that was a decline of a half percent. s&p was down by 2 points. the nasdaq closed higher. if you look this morning, you will see green arrows across the board. the nikkei in japan rose by a half percent. hong kong resuming trading

today. the hang seng was down slightly, down by about 43 points. mainland china remained closed. in europe, you are seeing some green arrows it looks like the dax and germany is up by 1%. the cac in france up by slightly more. the ftse up by 0.7%. look at crude oil prices. you will see that crude oil this morning is up just barely. up 19 cents. >> we'll get so some of that political news. watching a couple big business stories. apple rising following strong earnings. profits and revenue topping estimates. the company reporting bigger than expected iphone sales for the fourth quarter. some questions about what the rest of the year looks like. also the main action today coming after the close today. facebook is reporting fourth quarter results. street expects $1.30 a share on

revenue of 8.5 billion. and on the economic agenda the january adp employment report comes out at 8:15 a.m. eastern time. we'll have it for you live. that's followed by the january ism in december. construction spending at 10:00. automakers reporting january numbers. the fed wrapping up its two-day policy meeting with a big announcement which will be live on cnbc at 2:00 p.m. >> in a prime address last night, 8:00, it was exactly 8:00, you know how you get a ten-minute warning? it was right at 8:00. president obama announcing his pick, neil gorsuch for the supreme court. eamon javers joins us with more. i kept checking drudge and twitter starting at about 5:00 for who it was. no leaks. no leaks this time around. no leaks from anybody. i wonder how -- there must have

been strict instructions about how they wanted this to come off. >> there was a binder full of instructions, i was in sean spicer's personal office last week, on his desk he had a white binder about this thick. on the top it had scotus rollout. we were talking about something else, so i didn't go over and leaf through it. but there was a rollout here. they brought two finalists to washington, d.c. judge gorsuch actually stayed with a friend, so he wouldn't tip off hotels that he was in town. they rolled it out at 8:00 p.m. last night. here's the moment of the big announcement from president trump. >> today i'm keeping another promise to the american people by nominating judge neil gorsuch of the united states supreme court to be of the united states supreme court.

i would like to ask judge gorsuch and his wonderful wife, louise, to please step forward. so was that a surprise? was it? >> here's what we know about judge gorsuch. he's 49 years old, that's viewed as relatively young in supreme court terms. extremely young in supreme court terms. he clerked for justices byron white, and anthony kennedy. he was a harvard law school grad, class of '92. he is often compared to justice scalia, and is a proponent of originalism, which means looking into the text of the constitution, the text of the original law to try to suss out the meaning of the law, not interpreting it on current trends. this is a pick that conservatives will be happy with. joe, you know just how important the supreme court pick was to

president trump's entire campaign for the presidency. at points when it got rocky out on the campaign trail, he said think of the supreme court nominations that the next president will have, even if you don't like me or some of the baggage i bring, this is a reason to vote for me. this is president trump playing to that audience. democrats vowing to resist, but they don't have the votes at this point to block the judge. >> it's not as simple as that, because there are ten democratic senators up in two years from red states where trump won 60% of the counties. >> right. >> there was a unanimous voice, roll call vote for this guy in the senate. i did watch people last night

saying now we've seen what he's done on the court. all that is moot at this point. whatever he did last time, now we know what think record is. >> now there's a record. >> my god, it's extreme. >> republicans have 52 votes in the senate. they need 60 to break a democ t democratic filibuster. they need to pull eight votes over from the democratic side or do the nuclear option. either way they will go all out for this judge. democrats, as you say, not at all happy. let me quote elizabeth warren who said he had advocated to make it easier for public companies to defraud investors. as a judge he twisted himself into a pretzel to make sure the rules giant companies over workers. >> eamon, one question i have, maybe there's an example of it.

i read it overnight a lot. he has not deferred to regulators in the way that scalia had historically what does that mean in practice? >> in the law there's a general -- there has been a general respected for federal regulators, federal bureaucrats interpreting the law and judges have given them some due deference in terms of how they interpret the law. gorsuch has not necessarily sided with that. he thinks the law is the law and that federal bureaucrats should not be raised to their own court of appeals. he thinks the judges should be interpreting those laws, not regulated re regulato regulators. that's probably a positive for businesses. >> give credit to pete williams because minutes before the scoop he said he would get the role.

>> president trump's supreme court pick could have a big impact on american business. that's what we are definitely expecting. joining us now to talk more about it is a former assistant attorney general for legal policy for president george w. bush, he's now a law professor with georgetown university and a partner with kirkland and ellis. thank you for joining us. >> glad to be here. >> you know judge gorsuch personally. you went to harvard with him, correct? >> yes, we went to law school together. we have known each other for 20, 25 years as young lawyers in washington, d.c. i watched him with great admiration and respect. he's exactly what we expected when the president nominated him. even the former solicitor general for president obama praised him last night in the

"new york times" op-ed piece saying he's a judge that has respect for the law in the mold of justice elena kagan. it's hard to criticize and misrepresented judge gorsuch's record. >> you heard the criticism being levied by senator warren, who says he is somebody who comes down on the side of big business at the expense of the american worker and individual citizens. what do you say to critics like that? >> i think judge gorsuch understands that the role of the judge or a good judge is simply to interpret the law. if senators do not like the laws, it's in their province, at their pay dprad to changrade to the laws. but he will interpret them faithfully and without fear and favor. >> obviously this is a political decision and one that will be heavily politicized and viewed through all sorts of political lenses. andrew mentioned on the other

side of things, there's senator warren's view, and then on the other side the view that he will not be as nearly willing to cede ground or to take over from the regulators as antonin scalia was. do you agree with that? >> he's written a couple of opinions that suggest he's skeptical of deferring to regulators. senators should take heart in this. this is not an issue between the go judiciary and executive branch, but he so deep down it is a deep respect for the legislative and democratic process, not to be usurped by executive or regulatory authorities. in that sense, a fair-minded ledge later would actually see

that his philosophy, his revision of this tef fredeferen doctrine is protective of their authority. >> people will be trying to game this, this is a lifetime appointment. assuming he does receive confirmation by the senate, there are things he can do on his own. he made a point of saying last night in the speech that he likes to think independently as a judge. do you have any question that he would likely take up antonin scalia's seat in the conservative wing of the judiciary? >> the nice thing about judge gorsuch and justice scalia what you see is what you get. there's no surprises. they clearly arctticulate their philosophy, that judges are not there to make the laws but

interpret the laws. so there's no preferences for personal cases. it's the straightforward role of the judge. i'm confident he will carry that mantle well. justice scalia wrote an article called "the rule of law is the rule of l law of rules." judges are supposed to enforce the law by doing their job properly, not creating new laws. as long as we have that transparency all of us as individuals and businesses can go along with our lives. >> can you speak to the relationship he will have with justice kennedy and to the extent that justice kennedy will stay or eventually retire from his seat in the supreme court? >> i think justice kennedy is the fifth vote, the two men

served with each other, and they are even close in temperament, they even look alike and act alike. in that sense i anticipate the two of them will be much closer together on a personal level than even justice scalia and kennedy before. i do not think the appointment of judge gorsuch will decide on whether kennedy will step down or stay on. >> you have read that commentary that suggests those reading the tea leaves would make justice kennedy more comfortable on stepping down from the court which would give president trump an opportunity to appointed somebody else. >> certainly to give comfort to everybody, not just justice

kennedy, that president trump will be making appointments down the middle of judges who will interpret the law and not make the law. that would be consistent with justice kennedy's judicial philosophy and his overall expectation of the court. the decisions are fairly personal. it gives comfort to the american people as it should give comfort to justice kennedy. >> a lot to of people -- you still go to work every day. ruth bader ginsburg should have retired, right? that side is mad. she's 83. god forbid goes eight years, who knows if she makes it to 90, if she stays on the court and goes on through, you could have kennedy and her. that's why people say maybe the nuclear option. maybe the democrats hold their powder at this point. you are going one for one here.

gorsuch for ska lcalia, the nexe is where you tip it 6-3. i wonder if that goes into the thinking. >> i do not venture to guess at the thinking of senators, certainly of those in opposition to judge gorsuch. but you're right there are senior justices on the court. they're fulfilling their responsibilities extremely well. but we -- you know, we hope for the best and we prepare for the worst. i think this process we've seen over the past weeks in this election and discipline really of announcing judge gorsuch, i think should give everybody comfort that the democratic process is working well. when we can select and confirm such a great man. >> viet, people all along said we don't know what trump s he's not really democrat, republican,

conservative. bill kristol said he gave those 10, 20 suggestions, but he may come in and put in a souter, or maybe let merrick garland stand once he gets in. this immediately to those naysayers on whether you get a true scalia-type judge, trump went completely with that base. >> this is the most transparent and predictable process that we've seen. he started with a list of 20, then narrowed it down to a list of 10, and committed only those ten would enter his consideration in the final phase. he kept to that promise and selected one of the best judges in the country. whomever he selected in the next round should give everybody comfort. i was disheartened to see paul clement was not on the original

list of 20 or 10. but those qualified lawyers or cu curists should be in consideration. >> that transparency, the process an even the presentation last night, all setting it up as almost like this is a pretty mainstream guy. ed a your own peril smear him, which we know the guy will get bourqued so hard. it will get worse. god knows what they'll find. some people might be tired of that at some point. seems like a good guy. >> yeah, as a friend and admirer of judge gorsuch for over 20 years, i know he has no skelton in his closet. >> i don't know. you're not with him all the time. we'll find something. we'll find something. oh, yeah. >> if there's anything there, i'm sure the process will find it. i doubt there's anything there. >> we'll find something. >> he's an open book, joe.

>> really? you just wait. >> viet, thank you very much for joining us. >> thank you, becky. number one, not deferring to federal bureaucrats. who doesn't defer to federal bureaucrats? coming up, a closer look at apple's earnings. the stock trading higher in the premarket. ernst is finally right again. we'll be right back on "squawk box." rts thust drdr

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welcome back to "squawk box." our top corporate story, apple posting a big beat on the top and bottom lines. revenue topping $78 billion. as for iphone sales, they beat expectations, coming in at 78.3 million units. apple's cash hoard swelling to $246 billion. repatriation may be important to them given all the money abroad. let's talk more about the quarter and beyond with daniel ea ernst.

good morning. this was way better than people expected. there was so much critique of the iphone 7, that it wasn't as good as some people had hoped. now it appears that it's doing much better than we thought. >> correct. the beauty of apple is that it goes through these great periods of euphoria, these great periods of doubt. the earnings trajectory has been consistent over a decade or more. the sentiment around the stock shifts around. we're nimble in our approach to apple. two years ago when i went from the buy side, i went from jim cramer, don't trade apple to where i was like, you can trait apple. apple was $89, this time last year, there was another china meltdown, stock is up 25% year

over year over that period. we took down our exposure to apple. i would love to own it into the iphone 8 cycle. i think everyone and their brother, mother and uncle have written notes saying this is the year i want to own it for that always gets me a little bit nervous. >> now, you missed it on the way into this, you think. now you think you should be out? >> we owned it. we have done rather well are apple. we'll continue to own it. i think it's a question of how much do you have? i think we still have a lot of risk around tax and trade policy that we need to get through. but, yeah. big picture, you want to trache a step back, these guys generated $26 billion in free cash flow on the quarter, they have 226 billion. apple can weather all kinds of storms. >> you mentioned you still think

there's risk when it comes to trade, texas, other issues out there. in terms of taxes, is it baked in they'll be able to repatriate this money and if that doesn't happen the stock will fall? >> apple doesn't get credit for the cash here or there. even if the cash was completely untaxed, back completely on u.s. soil it would not really matter. if you back out apple's cash from the valuation, it's under nine times earnings. you will never win that argument. you should buy a stock because it's so cheap, but that doesn't make the stock go up. apple had iphone growth, revenue growth, earnings growth. i'm not worried about repatriation. >> you're more concerned about trade? >> more concerned about trade, but also some tax policies around the border adjustment

could create a bit of confusion. but big picture, if any company is able to get through that that has the resources, apple is making an investment with softbank. we will bring more of the components to the u.s. i'm optimistic that they'll be able to do it. but there's a lot of risk. we're not at a period of this great, oh, they're dead. when that happens, i'm buying. >> right. >> the story is still an ix pho iphone story. we long talked about the story will another product come -- >> $25 billion in services. >> so that's the answer? it's services? >> i don't think it's the answer. but you add that, they sell more dollar revenue of the watch than

rolex does. you add that together, it adds to the cash flow, the ecosystem, the stickiness of the ecosystem. we have this platform here that will continue to generate money. people are always going to doubt, provide opportunity for excess return. >> and computer sales up, ipads still -- >> ipad always surprises me. this is the first thing i pick up in the morning and the last thing i put down. i don't know how people don't have this. my kids have this, my wife. i don't understand it. it is what it is. sales are down. when we come back, the fed wrapping up a two-day policy meeting today. we'll watch at 2:00 p.m. for hints around the central bank's next rate hike. right now, let's look at yesterday's s&p 500 winners and losers.

♪ welcome back. you're watching "squawk box" live from the nasdaq market site in times square. ♪ good morning. welcome back. we've been watching the u.s. equity futures this morning. it looks like there are some modest advances. the dow would open up about 39 points. the s&p 500 up by five. the nasdaq would open up by 25.

look at some of the stocks we're keeping an eye on. advanced micro devices reporting a narrower than expected loss for the fourth quarter. the company seeing a jump in revenue due to an increase in demand for its graphic chips. match group's quarterly sales falling below expectations. tinder still more than doubled the number of paid members in 2016. the group's paid member count rose 23% on average. still that stock is down by about 7%. arconic is under pressure from its largest shareholder. activist elliott management nominating a slate of five director candidates to arconic's board, calling for new leadership to boost the stock price. after the bell yesterday, arconic posted weaker than expected results. the arconic ceo on "mad money" last night. >> the board and management, we will engage with shareholders.

we've done that continuously. we listen to what they have to say. then we will come to a conclusion. what is best, and i hope that this will be a joint agreement, and how we go about it. the good thing here is that there's a principle agreement that there is a lot of value that can be continued to be created. i hope this will be possible to do jointly. >> we'll talk to jim cramer in a couple hours and get what he takes after that. >> electrolux's q4 net profit came in line with expectations, despite a drop in organic sales. the household appliancemaker also saying the operating margin increased slightly to 5% as it is working towards rebuilding its north american market. so, we'll talk to the fed. before that -- you got sirius xm. that was cake, you never heard that song before? >> i don't have sirius xm in the jeep that i drive in because it's expired.

i keep thinking i'll buy a new car -- >> i'll give you that for a -- if you did have it, you would be on the highway or something. >> i'm listening to the nash -- country station here in new york. >> that was cake. famous for the song "i want a girl with a short skirt and long jacket." >> yes. >> that is a good look, don't you think. >> you're waiting for the flash? >> no. no, it's not a perverted thing. just a good look. long jacket, short -- that's their famous song. >> i like that song. >> i remember that song. >> this one. >> that song. >> the one we just played. >> the fed -- we need -- that's greg's thing. >> yes. >> i keep putting it off. >> it was on last week. >> it expired, i've been thinking for a year i'll buy a new car. >> it's easy. do i need spotify? it will play things i like? it seems simple to have sirius.

>> it is, and i would have it back, but i'm a little slow on things. i'm still driving a 2008 car. >> you have the baby excuse. >> i do. >> the fed have been meeting for two days, we'll hear what happens today, which is probably nothing. traders will be looking for clues about when the central bank might raise rates next. for more on what to expect, joined by david lebowicz from jpmorgan market funs, and chris rupkey. chris, looking at some notes, just talking about yellen. i want to talk about that. you think she might be in the cross hairs of the trump administration. you don't necessarily -- >> i don't know. >> you don't know if that's a bad thing. she stayed low for too long? >> i think she angered people by keeping rates too low for too long. it stemmed from bernanke originally, senator corker talking about you left rates

down here and have thrown savers under the bus. i would like to see change at fed. many other people were confirmed by the senate in positions, they offer their resignation. she'll be out next january any way. i think it's time for someone who might be more rules-based. at one time janet yellen told us that rates should be normal when the unemployment rate is low, and normal. it's not. >> they said 6.5, 6, 5.75. they move the goal coast. >> yeah. involuntary unemployment, the number of people out of work for such a long time. >> that is interesting, rules-based may be the new lexicon. >> one of my old professors is a big rules based person. >> andrew makesays the real est component of donald trump doesn't want to -- >> not the real estate -- the

presidential component of donald trump, the man who wants to make all the things he's talking about work -- >> weaker dollar. >> yes. rely on a weaker dollar and rely effectively on lower interest rates. the second you start raising interest rates, you are making things harder. >> forget about the dollar. >> but put the dollar aside. think about our debt. think about the cost of that debt. >> i'm trembling thinking about our debt. the baby boom generation will come and wipe us all out. >> i'm not defending -- i'm not defending it. i'm saying the fact that you think that president trump is somehow wanting higher interest rates is crazy. >> but some of the people he puts in positions will wanted higher rates. don't forget, it's not mortgage rates going up. it's not long-term rates going up, it's short-term rates. >> he said he likes waterboarding, too but he will defer to mnuchin or others on higher interest rates, or gary cohn. >> i'm not -- the idea he

defers -- people said he didn't want to wall. you are not supposed to listen to his actual words, and now -- yes, i don't believe there's any deference. >> i just want to note, one of the reasons i brought this up, i want richard fisher, because he's a friend of the show. we could have access if he became head of the fed. keep talking about it enough to get him in. who do you think would be good. >> kevin walsh, a number of people. >> you said forget about the dollar. i'm not sure we can forget about the dollar. the reason the fed had so much trouble getting rates off the bottom the past two years is because they've been stuck in this terrible feedback loop where the market is not letting them raise rates. what we need to focus on in terms of today's -- unemployment rate, 4.7%. headline inflation normalized. core inflation has been steady.

the dots are aligned, so to speak, for the fed to hike rates this year. we need to look closely at the statement, see what they're signaling for march. if the market is not comfortable for them in march, i don't think they'll go. we need to see what's in the statement. >> for me, who is the market anymore? it's really fed funds futures, those contracts are dead now. it's not actively traded. we don't need the market, they don't need the market's permission before raising rates. they should go back to a measured pace. >> they don't need the market's permission, but when the dollar strengthens, interest rates rise, equities sell off that tightens financial conditions. >> let's talk about the -- i guess the strength of the reaction. are you talking a few hundred points selloff or the markets coming down a thousand points? my guess is the fed will want to talk it out a bit, and not care

so much if there's a small reaction. >> i think a small pull back would be fine. they're not concerned about that, but they have their eye on the reaction to their rhetoric. for the past two years, that's what they've been dealing with i agree rates have been too low for too long. it's hurting savers. average interest income is at a 50-year low. that's hurting people who rely on income from savings to fuel some consumption. i wish the fed would get rates off the bottom, but i think they'll have a tougher time. >> well, they're going to put a few words in there possibly. they've been teeing us up -- if a rate hike is coming in the next meeting, they've changed their language a little subtly. they said things like maybe in the next meeting it will be appropriate to do things. they're waiting for some tfurthr

improvement or evidencement i'm lo evidence. i will be looking for the words some or next to try to tell us, yes, march is a possibility. >> chris rupkey, thanks. david, thank you. >> thank you. when we return, the ceo squawk call. dan amos will join us on the health of the insurance business, and then we have the ceo of eli lilly, he met with president trump yesterday. and later, kevin mccarthy will weigh in on the supreme court pick. you're watching "squawk box" here on cnbc.

welcome back to "squawk box." it's time for the executive edge. amazon planning to spend $1.5 billion to build an air cargo hub in northern kentucky. they expect to create more than 2,000 jobs when it does open. location not far from the u.p.s. major husband. last year amazon said it would lease 40 boeing 767 planes, 16

of which are in service. amazon handling more shipping in-house to deliver pack canals faster and cut costs. boy, sooner or later they'll be a real competitor to u.p.s. and fedex. originally people thought it was a check on the prices that they would be paying u.p.s. and allow them to -- >> i'm sure that's part of the reason it started. >> the way it's going, you may think we'll be using amazon service to ship things. >> if you want it to be there in two days, nothing against fedex or u.p.s., they're reliable services, but i guess somewhere along the way they want to say we can promise it there in two days, it's on us if it's not. >> you look at alibaba for example, i know it's in china, but they have the opposite model. they're completely asset-light. they own nothing. >> which is fine, but amazon has always been way into customer

service. it's all about what the customer wants. the only way to do that and make sure you're insuring that you're delivering what you want to be delivering is if you actually own it yourself. >> that is -- jack ma worked with all of these logistic providers to provide one day service to see if you can do it without having to own it. we'll see who is right about that. >> that's right. also bank of america says it will more clearly disclose the fees it charges its wealth management clients. this change will take place in the next few days. it covers a wide range of services including trading commissions, atm use and investment advice. brokerage firms are trying to prove they are acting in their investors best position as a result of a new law that goes into effect in april. coming up, dan amos will be joining us on the health of the insurance business and potential changes under the trump administration. as we head to a break, let's

take a quick check of what's happening in the european markets. some green arrows across the board. the dax is up by 1%. the cac up by 1.1%. stick around, "squawk box" will be right back. thth a e ths ov00les r ho y moleits e st. ventntfu

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box." this morning, aflac missing the mark with its latest results, but revenue topped wall street expectations, climbing 12% to $5.9 billion. the insurance giant's japan business also getting a big boost from the stronger yen. joining us from columbus, georgia, to talk about the quarter, health care, and the trump administration, aflac's ceo dan amos. great having you on the program. we love seeing you. help us try to understand what's going on with your business but also to the extent you can put it in the context of where this is all going relative to some of the rules and regulations that may be changing under the trump administration. >> well, we had a very good year in 2016.

our best year ever. as you mentioned, we had some earnings miss, but the reason we missed the earnings was because we took -- we were able to absorb a reserve adjustment in japan for an old block of business because of low-interest rate environment. we could still achieve our objective for the full year. we reaffirmed next year. so we felt very good about that. >> the regular story story, what's going to happen? >> well, the regulatory story is such that, you know, we sell in japan where 75% of our business comes in a single payer environment. so we have done very well. we also believe under the obamacare administration and what has taken place there, we have been able to sell. and we believe whatever will take place under the trump administration, we will be able

to do quite well. now, the only thing we hope will take place is it will be resolved quickly, and then we can move on to where the customer will know exactly what they've got and are willing to buy our products to fill the gaps and voids in their health care coverage. >> do you have any sense of how it's going to take shape and what it's going to look like, or if you don't, what you want it to look like? >> i don't think any of us know at this point exactly what it's going to look like. it's certainly a challenge on everyone's part to figure out what to do because part of the issues that you have to deal with are making sure that it is a large block of people. it has to be healthy people, and then there will be unhealthy and older people. so just if you get the older block of people, the loss ratio will go way up, and it would be

a problem. so they've got to make sure the masses are covered. in doing that, they ultimately can come up with a product and service that will be wanted, needed, and can at least break even. >> dan, let me ask you about that. one of the things president trump has said is he would like to make sure that, you know, you can still -- there are no reasons, no preconditions that would keep you from getting health sthurns. i think one of the problems we've seen to this point is that the penalty against the individual mandate has not necessarily been high enough to make people stay on health insurance all the time. you can wait until you get sick, go get on the rolls, get the coverage, and then drop off if you need to. how do you prevent that sort of jumping in when you need it, jumping back out when you don't? it seems like it would be one of the biggest problems for trying to provide coverage to the masses. >> i think you're exactly right. that is a problem. that's something that major medical insurance companies -- now, we don't sell that, but

we've experienced it for some time. so how and what they're going to do is a political issue that i don't know the answer to. but it is a problem and one they will have to address because you can't go in and out of the coverage. so how they're going to do it, i'm just not sure at this point. >> dan, is there any lesson to be taken away from the system in japan? it is a single-payer system. >> well, the one thing that happens in japan is everyone knows that the out-of-pocket expenses continue to rise. originally, there was no co-pays, no deductibles. then it went to 10, then 20, then 30. one of the things to come out of it is, it's not easy to find a way of making sure everyone is covered at no cost. you've got to have shared costs some way or another. otherwise, you're going to keep running up the bills. so you want some payment on

their part to keep that under control. >> okay. dan, love having you on. great to see you, sir. thank you. >> thank you. long-time broadcaster is wrapping up his play-by-play career. brent musburger came out from behind the microphone to wave to a packed house at halftime of the georgia/kentucky game tuesday night. he got an extra five minutes on the mike for his final game. thanks to a long two-point jumper for kentucky that sent the game to overtime. kentucky finally won 90-81. musburger rose to national prominence during the 1970s and '80s, calling a variety of sports, including the nfl and nba. the 77-year-old said last week that this would be his final game. he will be part of the vegas stats and information network, which is founded by his nephew. and coming up, apple shares rising after better than expected sale of its high-end

phones fueled an earnings beat. we'll talk about that again and take a closer look at the numbers. first, a first on cnbc interview with the new ceo of e eli lilly. he's going to tell us about his meeting with president trump yesterday. "squawk box" will be right back. ? a etos $ w

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a test for the markets. fed decision day. investors await the first policy decision since president trump's inauguration. we'll find out where you should be putting your money to work ahead of today's big

announcement. apple snaps the slump. the iphone maker reverses three straight quarters of revenue. and trump's supreme court nominee. the president selects judge neil gorsuch. the details of what is sure to be a highly contested pick and reaction from kevin mccarthy straight ahead. the second hf "squawk box" begins right now. live from the beating heart of business, new york city, this is "squawk box." good morning and welcome back to "squawk box" here on cnbc. we're live from the nasdaq market site in the middle of times square. i'm joe kernen along with becky quick and andrew ross sorkin. we should let this keep going and going and going. >> makes us more interesting. >> i've got myself doing the

"saturday night live." remember those guys? >> night at the roxy. futures this morning up 35 after a couple weak sessions recently. a couple triple-digit pullbacks. >> down by 0.5% yesterday. down by 0.6 the day before. if you add those two days up, it's the weakest two days since october of last year. >> it's like four out of five or something. check out the european markets. we are gaining some strength from what's happening over there. nice moves in a couple of the bourses. okay. let's take you through some of the big headlines this morning. the first fed policy statement of 2017 is ahead today. it comes out at 2:00 p.m. eastern time. policymakers not expected to raise interest rates this time around. we'll see what happens later. we're also a little over an hour now away from the monthly adp report on private sector employment. according to the consensus

forecast, u.s. economy added 164,000 private sector jobs in january. that would follow 153,000 in december. also, facebook is going to be out with quarterly earnings today. that happens after the closing bell. the social media giant expected to report profit of $1.31 per share. that would be on revenue of a little over $8.5 billion. and apple crushing estimates with its latest results. profit coming in at $3.36 a share. that easily beat the street's estimates of $3.21 a share. revenue topping $78 billion. iphone sales also beating expectations, coming in at 78.3 million units. and apple continues to add cash to its coffers. the company's cash ward now topping $246 billion. joining us right now is will power, senior research analyst covering connected technology. the street was caught off guard by this. you have an outperform rating and a price target of $145. so what in this report, if

anything, caught you by surprise? >> well, becky, good morning. thanks for having me. look, the iphone number was a bit better than expected. i think, actually, one of the positives out of the quarter relative to some expectations was the march quarter guidance. i think there had been some building concerns that could end up disappointing. i think, you know, now that they've come out with guidance that stacked up well relative to expectations, you've derisked the stock near term. it is a name we continue to like, even on anticipated strength at the open this morning. >> i guess people were thinking that you're going to have to wait for the new iphone, that you're going to have to wait for the iphone 8. is that something that you've thought to this point? >> well, look, i think a big part of our bull case has been around the iphone 8 cycle, what some are calling the so-called super cycle. we do expect a reacceleration of growth as that rolls out in the back half of this year. but look, in the meantime, you got a company that just printed almost $24 billion of free cash flow. so that's close to what they did

a year ago. you're not going to find many companies that do that in a year. i think the other real positive element here is services reached $7.2 billion. i think one of the things they notably called out is a forecast to double that over the next four years. so much more aggressive assumptions behind that line of business than i think the street might have been anticipating. >> if you walk into an apple store, i did it a few times over the holiday season, i can't say i'm surprised seeing these numbers based on how crowded it is, how hard it is to get an appointment. talk more about the services part of this. how does this -- do you think it transforms the company? >> well, it's going to be interesting to see. i think there have been opportunities there for a long time. the app store itself right now is growing 40% year over year. it's not like that's a new business. that's been around for some time. then you factor in, you know, apple music and, yes, it may not be as big as spotify and some of the others, but still has some traction. you throw in things like apple

pay and icloud, et cetera. they're continuing to drive more subscription, recurring based revenue streams. the big question is where do they go from here. i think there's some tantalizing opportunities, particularly around content. do they invest more in original content? tim cook suggested they've dipped their toe in the water, so to speak. there could be more on that front. perhaps that opens up a new growth avenue for them to capitalize on that big base of users out there. >> a lot of the doubters have thought apple needs the next big thing. where's the next ipad, where's the next iphone. is it going to be i-tv? you don't seem to sound like you think you need any of those things to make the case for apple as a buy. >> well, no, i think that's right. to the degree they've come up with a new hit product, whether it's something related to the car, whether it's related to tv, that's great.

the foiriphone right now is a platform. this is a platform company. we know it's much more than a phone. they're also the largest camera maker in the world. they interface to vast parts of our lives. to the degree they can add more capabilities and functions that drive that much more interaction and usage, that continues to drive the ecosystem and some of the services revenue opportunities. so over time, sure, they'll need some new product categories, but i think they've still got some room to run on what they have in the current pipeline. >> i want to thank you and also just say way to go with sticking with will power, as somebody who grew up with the name quick. i'm fascinated by people's names. you went with will power. way to go. >> it's been good. thank you. appreciate that. >> i want a backdrop like that, that says "squawk box." who do you work for? i keep forgetting. >> baird. >> oh, oh, oh. baird. >> that is cool.

>> baird, baird, baird, baird, baird, baird. >> i don't think he appreciates what's behind him. >> i think i must be missing it. >> is it a green screen? >> what we see is it says baird every three inches. >> i didn't hear anything you said because i'm like baird, baird, baird. i want that behind me. do i want "squawk" behind me or just joe? >> joe, joe, joe, joe. >> never enough joe. >> will, thank you. president trump nominating federal appeals court judge neil gorsuch for the supreme court last night, filling the opening following the death of antonin scalia last year. our next guest, john malcolm. good morning to you. >> good to be with you. >> tell us about this gentleman and the way you see his role, if he gets approved to be on this

court. >> well, neil gorsuch is a brilliant man. he's 49 years old, went to columbia college, got a doctorate from oxford university, then went to harvard law school. he clerked on the d.c. circuit court of appeals. then clerked for two supreme court justices, one appointed by a democrat, one appointed by a republican. he then served with distinction at a prestigious firm in town. he served in a high-level position at the department of justice. for the past, i think, 11 years, he's been on the tenth circuit court of appeals, where he has clearly distinguished himself as a brilliant writer and a deep thinker. >> john, question for you about how the business world and the business community to the extent we talk about investment, business and the like, how do you think he thinks about the world of business? there have been reports and certain decisions he's made that suggest that he is going to be less dempbable, for example, to regulators. the question is whether those

decisions will be applicable to the business community. >> yeah, they quite possibly could. so on labor and employment cases that he has dealt with, he usually rules in favor of the employer, but not invariably. there's a nuanced view. his view on regulations, though, is actually quite interesting. so the seminole supreme court case is a case called chevron in which courts generally defer to the interpretation of laws by executive branch agencies when the law is ambiguous and when the agency's interpretation is a reasonable one. he has explicitly called for the supreme court to revisit and overturn its chevron case. it's not so much that he doesn't like administrative agencies so much that he believes it's the role of a judge to look at a law that is ambiguous and to give it the court's best interpretation of that law. and not to say, well, since it's ambiguous and since your interpretation is reasonable, we'll just punt it to you. he thinks that's an abdication of the judicial duty. if his view were to prevail,

administrative agencies would have a lot less discretion in terms of how they interpret vague laws. with respect to state regulations, on the other hand, there's a doctrine that's referred to as the dormund commerce clause. the clause is in the constitution. states often, when congress hasn't spoken, attempt to regulate on matters that affect interstate commerce. courts have, when they think the states have interfered too much with interstate commerce, have occasionally said, no, even though congress hasn't spoken, this goes too far and violates the commerce clause. he's said, look, there's no commerce clause in the constitution, and he has declined to apply it in cases when he's had the opportunity to do so. so if his view prevails when congress is violent, states may have more ram to regulate. >> john, when you look -- you know, he's been compared often times to scalia, the role he

would be replacing. more or less conservative? i've been on a couple different websites where they have these graphics, these sliding scales. they put little pictures of each of the different justices. where do you put him? >> yeah, you know, it's hard to determine, for instance, what they mean by conservative. so for instance, antonin scalia was often referred to as the criminal defendant's best friend on court. he had a conservative approach to judging in that he was an originalist, he paid attention to the criminal procedural protections criminal defendants had, even though he often reached a result that conservatives wouldn't like. i would actually say in that regard, neil gorsuch is a lot like antonin scalia. however, when it comes to the deference due to administrative agencies, there they appear to be on opposite sides of the spectrum. >> and the last question i'd ask you is a question we asked in the last hour. his relationship with justice kennedy and to the extent you believe this relationship would change justice kennedy's

decision to stay or ultimately retire from the court. >> well, i don't know about that. justice kennedy is 80 years old. he's been on the bench since the reagan administration. i suppose he's entitled to retire whenever he wants to. he certainly ought to have a good relationship with neil gorsuch. he's now viewed and has been for some time as the swing justice. neil gorsuch is a pretty persuasive guy and perhaps he will tilt anthony kennedy a little more in his direction. whether he'll feel comfortable enough to say, okay, it's time to hang up my spurs, that i don't know. >> okay. john, we'll leave it there. appreciate your perspective and time this morning. >> good to be with you. >> thank you. >> takes a unique individual to be a judge. >> the disposition. >> and just the firm beliefs. i think i believe something, and someone will say, what about this? yeah, you know, you're right. i mean, i would never know -- there would be no consistency. and you need consistency. people would have no idea.

fair trade, you got to have free trade. unencumber unencumbered, borderless. >> you were pushing that. >> what a crappy judge i'd make. you need to believe in things. i'm going to come up with some things i firmly believe in. coming up, the ceo -- like drug pricing. charge what they need to. no, no, maybe not. the ceo of eli lilly talks big pharma and president trump. he met with him yesterday. and later, morgan stanley's ruchir sharma joins us. you're watching "squawk box" on cnbc. this is my headquarters. this is where i trade and manage my portfolio.

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♪ president trump meeting with top pharmaceutical executives in washington, calling on them to bring business back to the united states. >> you have to get your companies back here. we have to make products back --

we're going to get rid of a tremendous number of regulations. i know you have some problems where you cannot even think about opening up new plants. you can't get approval for the plant, and then you can't get approval to make the drugs. other than that, you're doing fantastic. so we're going to get that taken care of. >> joining us now, david rick, ceo of eli lilly. he was among the executives that met with donald trump. we welcome you, and thanks for joining us today on "squawk box." >> well, thanks for having me, joe. i know john loves coming on the show. he's sailed off into retirement. i'm glad to be with you this morning. >> i'm sure he's still around when you need, you know, some advice. >> he's still chairman, right. so he's there for me. that's right. >> so i looked at all the things yesterday that were discussed, and i almost thought about doing a ben franklin list about

positive things and negative things for the pharma industry. it just depends on what you think. is it possible there could be enough positive things in terms of, i don't know, getting the fda to act more quickly, corporate tax reform that using a carrot approach to bring manufacturing back here, are there enough things that will offset price pressure that the president wants for you to try to get prices down? was it a positive for the industry yesterday, or are you guys going, oh, my god, we got problems? >> well, i think it was a positive meeting. we touched on a lot of topics, joe, from tax, regulation, as you're mentioning, to how the health care market works, why consumers are frustrated with paying a lot out of pocket for their medicines, which i think the industry acknowledges is an issue. we had a chance to talk to the president about why that's happening. i think the thing for me, though, that was most encouraging is he clearly understood and was listening to the message of innovation and

what our industry can do, which is both be a key contributor to the health of americans and addressing health care costs and at the same time we're really a crown jewel for american enterprise in the sense that about 70% of the industry is here in the u.s. most of the r&d dollars are being spent today in american companies. and it's an export company. so i think overall, it was a positive meeting. of course, he's concerned about prices of medications and wants to do something about that. we'll work with the white house and capitol hill over the coming months to look at some more market based solutions that can help consumers pay for their medications. >> all right. because market based -- and whenever you talk pharmaceuticals and say, well, you know, you want mark based, well, yes and no. should you negotiate with medicare, with the government on prices? that's what you would do in a normal market, but that's going to be a negative for you, isn't

it? >> well, you know, we really think that the -- of course, a lot of health care regulation has been around a while. the most latest piece is the part d legislation that came out in the middle of the last decade. and this really delegates the responsibility of negotiation to major health providers like united health care and others. they work with the drug companies. they are fiercely interested in negotiating down drug prices. also, concerned about keeping consumers and having choice. we think that balance is just about right. and that piece of government legislation, the part d benefit, which expanded over a decade ago, is really the model going forward. i think the white house staff listened to that. i think a lot of leaders on the hill agree with that statement. so as we look at potential medicaid reform, as we look at what to do about other uninsured populations, that's where the industry's pointing, that model.

>> is it possible that the environment here in the country could be, for manufacturing, could be as attractive as -- i don't know, where is the most attractive platform? we make drugs all over the place. a lot of factories have moved out. where's the most tax advantaged places, and could it be brought back here with not a stick but with just inducements to do it? is it possible? >> i think so, actually. if we look at the u.s. corporate tax rates, which is a driver for pharmaceutical manufacturing, in terms of where people put their locations, whether it be contract manufacturers who we work with or, you know, full-fledged companies like lilly. those have been tilted toward tax advantaged locations. that's one key consideration. what i would say is we would prefer to make those decisions about where to put our plants, where to have manufacturing jobs not based on the tax rate. as you know, the u.s. tax rates are not competitive with the rest of the globe. so getting those in line or

perhaps even better would be, i think, an advantage for looking at sites in the u.s. going forward. >> and then the one other thing that if you really take a negative view of pharma pricing, you can say for the last 10, 15, 20 years, when companies are making a lot of money on a st staten or making a lot of money on something, they have advertising and push extended release to avoid generics once the patent runs out. they have tried all kinds of sort of slight of hand to keep prices high. i'd like to think that, you know, it was priced just purely on market forces, but i'm wondering whether there hasn't been some activity that's been detrimental to consumers and just to the spirit of the law of what you're trying to do. i mean, can you guys be more, you know, consumer friendly than profit centric? i can't believe i'm saying this. >> i would say for lilly, that's

not something we've undertaken. i think what you're talking about is cases where people have sort of evergreened by creating a new form and pulling the old form. that's not something we've done or would do. we think consumer choice is key, and when your patent runs out, the generic should be available. of course, we fight vigorously to defend our patents, but once that period is expired, that's one of the great legacies of this industry. we invent new things that really change lives and save lives, and eventually they become extremely inexpensi inexpensive because they go generic. big payers do a good job of managing their formulas so patients have to try the generic first. that system more or less works. today 90% of drugs filled in the u.s., of prescriptions filled are generic and very inexpensive. that's a legacy of our industry. i don't think that's well understood. yesterday we announced our earnings as well. good fourth quarter. i get the question about pricing. price played a 1% role in

pharmaceutical growth that was 9%. so really, we're trying to drive volume with new therapies, and pricing gets a lot of press but it's actually not playing a key role in our return to growth. >> great. next time you have earnings, we'll come in and talk more about that. we used to talk to john about that. after meeting with the president and you see the headlines, it's like, holy smoke. a lot of moving parts. >> absolutely. >> we got to see exactly where he stands and exactly what the response is going to be from big pharma. anyway, thank you. i want to see you again soon. >>thanks, joe. coming up, this morning's top stories. plus, we're going to talk global markets. take a quick look at the futures. the dow looks like it would open higher about 37 points. nasdaq up about 26 points higher. the s&p 500 up about five points. a lot more "squawk" when we return.

still to come this morning, top investing trends for 2017. ruchir sharma of morgan stanley will join us after the break with ideas. and later, kevin mccarthy is our guest. we're going to talk to him about the worlds of business and washington colliding. as we get to a break right now, let's look at the u.s.

equity futures. we're looking at a positive open with dow futures up by about 37 points. s&p futures up by five. the nasdaq up by 26. "squawk box" will be right back. . the classes, the friends, the independence. and since we planned for it, that student debt is the one experience, i'm glad she'll miss when you have the right financial advisor, life can be brilliant. ameriprise

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♪ good morning. welcome back to "squawk box" right here on cnbc. we're live from the nasdaq market site in times square. among the stories front and center at this hour, the nation's automakers will release january figures. overall, industry sales expected to be down slightly from a year ago. general motors and toyota are seen posting small is increases while ford and fiat chrysler expected to see a sales drop. also, this morning's busy economical dar. the institute for supply management's monthly manufacturing index comes out at 10:00 a.m. it's expected to come in at 55 for january. mortgage applications fell 3.2% last week. that's according to the mortgage banker's association. both new purchase applications

and refinancing activity fell as average 30-year mortgage rates rose slightly. caterpillar announcing its world headquarters will move to chicago. this move is expected to take place bit end of 2017 and scraps the company's plans to build a new head quarters in peoria. and a press release tuesday, the company announced about 300 employees will be moved. according to caterpillar, offices in peoria will be used for company offices. caterpillar citing continued economic challenges and the need for growth as the reason for the move. budweiser's super bowl ad making some head lines ahead of the big game. the minute-long commercial called "born the hard way" follows the journey of the brewery's co-founder, a german immigrant in the 1800s. the advertisement coming of course in the midst of widespread protests over president trump's controversial immigration orders. budweiser says the timing of the commercial is a coincidence. the company issuing a statement saying the ad is, quote, a story

we believe will resonate with today's entrepreneurial generation, those who will continue to strive for their dreams. all right. president trump's victory in november caught many forecasters off guard. morgan stanley's global chief strategist ruchir sharma joins us on set to talk more about the new age of globalization. i felt -- i got excited, then i got depressed, then i got excited, then i got depressed just looking at the things. it's a mixed picture. there's some positive things happening in terms of growth in europe, but there's some negative things happening in terms of an ageing population. underlying fundamentals that aren't going to be what the reagan years were. there are changes structurally to make it hard to get that kind of growth again. >> absolutely. i think that the most

underestimated trend over the last decade has been the change in demographics. you brought up this question, can the u.s. economy grow again like it did in the 1980s and 1990s? i think the answer is not for the reasons we think. people get into all sorts of ideological debates. the population is growing at a much slower pace. that's the main reason why the global economy today is growing at a much slower pace. there are two drivers of economic growth. the number of people entering into the labor force and how productive they are. the number of people entering the labor force has dropped dramatically over the last decade. i think that's taken off a percentage point of the growth rate of the global economy and of the united states. so that, to me, the single most important reason why the trend growth in the u.s. economy is 2% and not the three to four in the '80s and 1990s.

>> millennials, again, on their stupid electronics, not meeting people, not getting married, not buying houses, not having sex and having children. again, it's the stupid facebook. it's not that simple? >> no. >> i think it's the other way around. from 1950 to like 2005, the world economy saw such an increase in its population growth rate that it had never seen before. that became the anchoring bias. >> we did our part, ruchir. that's all i know. >> millennials feeling like they can't get out from under debt when it comes to the college debt. they can't raise the money -- >> pay off your loans, maybe. get off the electronics. >> these kids grew up in the financial crash and have had a much tougher time. >> cut off the man bun so you do better in your interview. >> you're showing your age. >> joking. i'm joking. then ruchir, i get word -- so you cut corporate taxes. you think maybe that's what we

did in the '80s. you're worried it works for a while but creates a book/bust economy. >> the entire point is today the u.s. economy is running the largest fiscal deficit that it has ever run at this stage of an economic expansion. seven years into an economic expansion out here. and we have a budget deficit of around 3% of gdp. that's never happened before. where has that mantra gone that you should run surpluses. so i'm not against corporate taxes or those cuts. just telling you what the limitations are. the more important point is even if you get productivity up to the reagan years or even the clinton years because of tax cuts, because of deregulation, the demographic changes are such that it'll be very hard to grow at a sustainable base of much above 2%. i think that's the central message that i have. >> let me ask you this. i think europe has been held back for a lot of reasons.

for structural reasons. but i also don't think necessarily the way the system was put in with the eu, the common currency but no central financial thread, i think that's held them back. so you think we're at an age of deglobalization. is it always a bad thing, or could it get these other countries actually to perform better even if they were more nationalistic? >> well, the good news is this. the european economy, i think, has turned around. in fact, for the first time since the end of the global fj crisis, the european economy today is growing at a slightly faster pace than the united states. that's a big deal. and that's because the european economy has already suffered two recessions in the last seven years. that's highly unusual for two recessions to be bunched up like that. it means there's a lot of pent-up demand. here's the other good thing about europe. the welfare state concept, the thing about too much government spending, that seems to have peaked. if you look at -- >> hard to reverse. hard to take it back.

>> when countries face a crisis, they're forced to cut back. that's what we're seeing in many parts of europe. you've seen that in spain, portugal, other countries as well. so i think that europe looks relatively good today. look at it compared to the united states today. at least from an equity perspective. today the european markets, compared to the united states, on a relative basis are at an all-time low. you've never had such a huge degree of underperformance. and the euro is quite cheap today. i think that combination could be quite powerful for europe. >> you know why the euro is cheap. germany gets a cheap euro because of all the countries that aren't pulling their weight in southern europe. >> right. >> one last thing. i need this cleared up for me. is it possible that individual areas or countries could get more nationalistic but become more competitive internally? and we're still going to be global. they're still going to sell to the rest of the world.

is nationalism always a bad thing for the globe entirely? because when we get competition, we don't necessarily not like -- competition makes everybody better. we all use capital more wisely. couldn't individual areas and countries become nationalistic but globalization continues, even more efficiently? >> that's possible. one positive aspect, which i've been telling people, has to do with corporate taxes. the u.s. cuts its corporate tax rate down to 15% or 20%, that could lead to a race to the bottom. that could be a positive. there can be positive offshoots of it. defense spending is going up in many countries because of increased militarism. >> is that a bad use of capital? >> i think so.

>> buy lockheed martin. >> i think tax policy is the new form of protectionism. that's what we're seeing everywhere out there. i'm not sure that's always good. but yeah, i take your point. the one positive thing i see everywhere is a race to the bottom for corporate taxes, if the united states moves and enacts a big cut in corporate taxes. i think that's a positive. >> i don't know. do i need a drink, or am i optimistic? >> no, i think one of the things -- >> are you positive? is the future going to be good for everyone? or are the best days passed? >> i think in terms of the growth rate, we're going to get back to the growth rate -- >> unless we get the millennials on board. we're back to that. go meet someone. go on tinder or something. >> some of the weak spots of the global economy are finally showing signs of coming out. the most important question to me, which is fascinating for everybody, is why the markets aren't joining the protest.

everyone is asking while all this is going on. >> maybe they will. >> the global economy is showing good cyclical momentum at this stage. that's not bad news. >> i think it's going to happen. turn 30, realize there are other things in life. >> i'm with him. i think it's going to be tough going. i've been on that train for a long time. >> we knew each other before. i said, get married, would you. you did, and now look at you. twins, a new baby girl. took my advice. thank you, ruchir. coming up, listen to me about these other things too. donald trump revealing his nominee for the supreme court. we're going to get reaction from the house leader, kevin mccarthy, after the break. ♪

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welcome back, everybody. president trump unveiling his pick for supreme court last night. while he awaits confirmation of his selected cabinet nominees. and after a week of executive orders, the president will be working with congress to see his agenda implemented in the coming months.

joining us now is house republican leading the way, majority leader kevin mccarthy. leader, thank you for joining us today. >> good morning. thanks for having me on. >> we hinted at this in the introduction, just the massive amount of new things that are coming down the pike right now. you've got the supreme court nomination. you have the immigration ban. you have the cabinet nominees. you have regulatory reform. you have tax overhaul. a lot of different moving poo pieces. i guess the first question i have is, how do you try and prioriti prioritize, and which things do you put first? >> well, we've got an order for the first 200 days. of course, you have to do supreme court. that's the senate. the cabinet, you've got to get that filled through. there's going to be 1200 positions when you change administrations that have to be confirmed. but what we're looking at is regulatory, health care, tax refo reform, in that order. we have the congressional review act that allows us to look back

the last 60 legislative days. that means we had to be in session, and there were a lot of days we were not because of the campaign year last year. and going forward, we can pass those bills in the house, but they could pass in the senate with just 51. so they become privileged on january 30th. you'll see our first bill moving today. the stream buffer rule affects the coal industry throughout america. it would put 64% of coal throughout america out of reach for energy production. it would eliminate anywhere between 40,000 to 78,000 jobs. and that wasn't even put into effect until after the election in december. so we're taking a look at that, moving that through today. we have five other regulations going through this week. >> leader, you're the second republican in the last week who has talked about the first 200 days here on the show. we always talk about the first hundred days, the trump administration has certainly laid out what they plan to get accomplished in the first hundred days.

is the first 200 days that you all are using kind of a nod towards the idea that this is a big agenda and it's going to take more than a hundred days to get accomplished? >> when you think about how much has to be done, you have to restructure washington. so there's a lot to get done. you can't just reform health care. that's 20% of the economy, what they went through the last five years. changing the regulatory system. think about what the last administration did. for the last five years, they implemented, on average, 83 major rulings. each one of them costing more than $100 million to business. they added more than 12 king james bibles to the federal registry in regulation. then think about tax reform. no matter what you do there, it's difficult, but we've got to get the economy growing if we want to solve any of our problems. you've got to do all three of those pillars. then you also have infrastructure at the same time. to get those done, you cannot cram that into a hundred-day

agenda because you want to get it done correctly. and they build upon themselves. so 200 days is, in my view, the right time frame to make sure it happens through the house, the senate, while at the same time getting the appointments through the senate. >> you said you're going to be tackling things, regulatory first, then health care, then tax reform, in that order. you're right. these are all very complex, sort of difficult things to try to find agreement on. when you really look at health care and pulling back obamacare, trying to come up with a replacement, that to me seems like a much more complicated scheme to come up with than tax reform, where you may find some bipartisan support. why health care first? is that because of campaign promises? >> well, health care we've been working on for quite some time. it builds upon itself. if you're able to work through health care, it's what the american people need and desire. truthfully, and frankly, health care is collapsing. obamacare created 23 co-ops,

provided $2 billion, 18 of them have already collapsed. you see premiums continue to rise. you have more than 3,000 counties in america, but one-third of them only have one option. you have to relieve them of that. that's why you have to go after health care first. in doing so with health care, it changes the baseline for tax reform, allows you to have a broader tax reform overall, which helps all of america. >> leader mccarthy, good to have you on while california is still a state. not sure how that's going to work, if there is a secession. you would be like an ambassador. no, but there are crazy things happening in the country. very disturbing piece in "the journal." chances for cross-party compromise are dimming in the last couple weeks in the wake of a lot of these executive actions. you can only do so much with 51 or 52 votes.

we saw it happen with obama -- president obama. they pushed through obamacare. then nothing happened. was there any legislation for six years? all he had was executive orders at that point. you guys could end up in the same boat if you're not thinking long term. >> you've got to think long term. i say to all of america, let's step back and take a deep breath. let's put our country before ourselves. >> it's not going to happen. not going to happen. i'll read you some of chuck schumer's comments this morning on neil gorsuch. if you think that's going to happen -- well, you don't think that's going to happen because it's not. >> well, look at the rollout last night. i was there in the white house. i thought the rollout, the president did a tremendous job. i thought his selection -- and i look at donald trump and i look at the way he handled the selection. even all the way back into the campaign. he has taken the role of president, of picking the supreme court very seriously.

he laid out to the american public very early a list of those that he would look to. so they actually had a choice and a belief to understanding of what his thought process would be here. he looked back at who he selected. neil gorsuch is an amazing individual. i think probably one of the most qualified individuals ever to be nominated for the court. having just gone through a nomination back in 2006 that was unanimous where schumer actually supported it. if it's going to come down to politics, where people are just going to say no to that, i think that's when the american public have got to rise up and say you can't put up with this. >> both sides could probably do welt to let the other side, give the other side enough rope to hang themselves. now, in two years -- right now, i don't know. you've got protests everywhere. you've got protests outside schumer's house. they're mad at him because he's being too nice to republicans. >> unfortunately, i haven't seen that side yet. >> oh, yeah, yeah, yeah. they're mad that he's cooperating at all.

but i think that the country spoke and said something on november 8th. if you guys just aren't completely obnoxious, in two years you could get another seven, eight senators probably, in states where trump won 60% of the counties. so if you don't screw it up, you might get to 60 eventually. >> you know what, i'd rather save the country than worry about whether i win more elections in the future. it's too important. i think if there's anything this election should have taught everyone, when they sat out there, they read into the polls all wrong. president trump listened to voices in washington no one was listening to. people ought to put the politics aside and start listen to be people. i think doing so will transform this country and really, when you look at the agenda, that's what the country was asking for. >> okay. gorsuch will get in, but i just still wonder about the nuclear option, the nuclear deal. it's two years away. i don't know if you get any of those red state democrats this early. they got to probably not break

ranks early on. although, probably a good idea to do it -- do nouclear this time. anyway, majority leader, thank you. we'll have kevin brady on later and sask him some of these same questions. all right. coming up, stocks that you need to watch ahead of the open. futures right now have gone up even more than they had been. or. sixty to seventy million people are moving to cities every year. at pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha in real estate, infrastructure and emerging markets. partner with pgim the global investment management businesses of prudential.

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there are some stocks on the move. we're going to take a look at a couple of them now. marathon petroleum reported quarterly profit of 43 cents a share. results were helped by strong performances in its refining and transportation units. downstream seemed to be a little better for all these companies. although, i think marathon is more of a downstream company. then anthem beat estimates by 15 cents with quarterly profit of $1.76 a share. the health insurer's bottom line boosted by better than expected enrollment figures. align technology beat estimates on the top and bottom lines then gave an upbeat forecast for the current quarter. this is the company behind the invisalign clear braces dental system. >> i had them. >> we both had them. >> look at these pearly whites. >> beautiful, beautiful.

>> only one cavity. coming up, apple's big quarter. we're going to talk about it. crushing iphone sales estimates, giving investors a reason to cheer after the bell. we're going to talk more about those numbers. then later, we're going to talk tax reform. president trump with house ways and means chair kevin brady. mr. tax man. we're going to talk to him in a bit. ♪ it's been over 100 years since the first stock index was created, as a benchmark for average. yet a lot of people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? why invest in average?

a big boost for apple. surging iphone 7 sales helped the company snap its losing streak. breaking economic news. we're just minutes away from the adp employment report. the numbers and market reaction straight ahead. plus, kfc's first ever super bowl ad. we'll have you seeing double. we'll tell you why as the final hour of "squawk box" begins right now. live from the most powerful city in the world, new york, this is "squawk box." > . good morning and welcome back to "squawk box" here on cnbc, live from the nasdaq

market site in times square. i'm joe kernen along with becky quick and andrew ross sorkin. the futures, last we looked, up about 40, 45. the s&p up six. the nasdaq up just under 30. treasury yields moderating a little bit, down 2.46 or 2.45. 2.47 now on the ten year. making headlines this morning, the big news, apple shares are jumping on better than expected results. iphone sales blowing past wall street estimates. the stock right now, take a quick look, looks like it's up over 4.5%. separately, mortgage applications fell 3.2% in the latest week, a 13% drop in fha applications. this was the result of the trump administration reversing a cut in the fha's annual mortgage insurance premium. the first fed policy statement of 2017 is ahead today. it comes up at 2:00 p.m. eastern time. of course, we'll bring it to you live. policymakers not expected to raise interest rates, at least

this time around. also, some stocks to watch this morning. amazon's going to be investing nearly $1.5 billion in an air cargo hub in northern kentucky. lest you think this is some sort of exexperiment, the company is agreeing to a 50-year lease on 900 acres at the cincinnati northern kentucky international airport. a mixed quarter for tupperware. the household products maker says it was pleased with its performance in what it called a challenging environment. and pitney bowes missing the mark on top and bottom lines, cutting its 2017 outlook. as a result, that stock is down by 6 pn.7% this morning. match group shares fall after lower than expected

revenu revenues. they own tinder. tinder was hot. >> they're doing well. sick commentary. electronic arts topping estimates, but the video game publisher is forecasting current quarter revenue below estimates as it pushes the launch of an nba live game later this year. invitation homes will begin trading on the new york stock exchange today after pricing its initial public offering at $20 a share. that was within the expected range for the real estate investment trust. >> this is a great name. >> what? >> tinder. >> oh, i thought you were on invitation homes. >> no, still back on tinder. it's a great name. fire starter. kind of like spanx was a good name. >> she came up with that and changed the "x" because it looked cooler. a whole lot of work on what really sticks with people. the hard "k" sound works. >> yeah, all right.

eamon follows good conversation. president trump nominating neil gorsuch. >> hi, joe. i'm trying to think of a spanx segue, but i got nothing. >> it's hard. it speaks for itself. it's a good name. >> it does. let's move on to the news of the day, shall we. the president making this announcement at the white house last night, just enormous suspense and drama around this. the president rolling out his pick for the supreme court in a prime time live televised ceremony at the white house. here's how president trump explained his thinking around the pick of neil gorsuch for the supreme court last night at the white house. >> i have always felt that after the defense of our nation, the most important decision a president of the united states can make is the appointment of a supreme court justice.

depending on their age, a justice can be active for 50 years, and his or her decisions can last a century or more. >> that century timeline is part of the reason ironically why democrats will fight gorsuch as intensely as they can. here's what we know. he sits on the court of appeals for the tenth circuit. he's 49 years old. how reassuring to hear people who are 49 years old being discussed as very, very young for the job. he clerked for justices byron white and anthony kennedy, graduate of harvard law school, class of '92. he's often compared to justice scalia. he's a proponent of originalism, which means he looks at the text of the law, the text of the constitution for interpretation of what that law should mean. so a lot here for conservatives to chew over. as we were talking about in the earlier hour, the appointment of a supreme court justice was so key to president trump's campaign among conservative voters. he said, look, if you don't like

me, you don't like my baggage, my personal style, whatever, think of the supreme court. that was a compelling argument for those voters. the question is whether democrats will be able to do anything to slow this nomination down and keep judge gorsuch from getting on the supreme court. it looks like they simply don't have the votes in the senate. >> but a clear, clear follow through on what he said he'd do. >> exactly. >> just to the letter. >> the trump white house is saying that this was one of the most transparent processes in supreme court history. the president laid out a list of possible nominees back during the campaign. we haven't seen that before. and he stuck to it, picking from that list, and unveiling it reality tv style at the white house with a dramatic flourish last night. they went to great lengths to keep the final pick secret. looks like it held almost right up to the actual announcement

itself. >> yeah, my worry, eamon, he's too young. 49. >> i also think 49 is very, very young. >> too young. can he really know anything? it's been my experience, if you're not 43 or 44, at least 45, you're just so green you haven't really sorted out your thinking. you know what i'm saying. >> yeah, no, i feel really green myself, joe. >> okay. that's good. >> under 49. >> 49 is young. really, because especially, you know, now days, do you remember when we were growing up, eamon, i think the mortality rate was like 70 or 71. for some reason now, it seems like it's -- when people die at 80 or 81, it's like, wow, taken from us way too young. >> well, look, a lot of people are applying the actuarial tables to the supreme court and trying to figure out, if you game it out, not to be morbid, but just how many picks to the supreme court could donald trump have. one estimate, he could get four

picks maybe to the supreme court, depending on how many years he has in office. that's something that folks on the left are horrified about. >> stop. don't tease me. i just got chills. >> right. look, the left is horrified about that. >> four? >> you don't know. depends on who retires, who lives, who dies. these things are out of our hands. but when you look at it, the power of the presidency is significant in terms of the supreme court. these have lasting effects. that's what trump was talking about last night in terms of a century of judicial precedent here. >> average life expectancy of an american male. >> yeah? >> what do you think it? 76.4. for a woman? >> 103. >> close. 81.2. >> don't you want a court that's pretty down the middle? >> no. >> okay. >> not at all.

>> no, you don't? a solid -- let's talk about apple this morning. >> bye, eamon. >> a little less controversial. a solid showing for apple. the company posting earnings above analyst expectations as well as a nice jump in year-over-year iphone sales. now the talk turning to what comes next for the tech giant. for more on that, let's bring in the personal tech columnist at "usa today." good morning to you. >> good morning. >> iphone 7 sales way better than people thought, even though i don't think you thought the was earth shattering or great. >> it's a nice phone, good camera, but not dramatically better than what came before it. >> one of the analysts we were talking to in the last hour was saying this is the year where investors start buying in to the stock because they think something big is going to happen with the iphone 8 on the ten-year anniversary. something mind blowing or really game changing in the same way that the last cycle around, the iphone 6, the original 6, we saw the shift in terms of the size

of the phone, which really did change the dynamic of what was taking place. so what are you expecting? >> that obviously raises the expectation of what this thing is. the ten year, it's got to be special. we don't really know. there's all sorts of rumors. bezel to bezel design. >> a what? >> you're literally going to lose that little bit of edge on each side. >> oh, so it's a full screen the whole way through. >> exactly. we may lose the physical home button. everything may be embedded in the display, including the fingerprint sensor. >> oh, man. >> the screen might be flexible, curved like we've seen on some samsung phones. will it be bendable? it's all speculation at this point. and give me wireless charging, a feature we've seen on rifle phones that apple has resisted. >> but do you expect any of that? one of the things that has happened over the years, pretty much across the board, is there's always -- the expectations are always higher, dare i say, than what they deliver. >> we'll see. i don't know is the short

answer. my expectation is they'll do something. again, we've set this expectation, ten years, they've got to do something. you know what the stories are going to be. they met those expectations or, oh, is that all there is? we'll see. >> do you think there's going to be a change in terms of we saw computer sales were actually higher. that was an improvement. >> back up like 1%. >> right. but for some reason, the ipad has not managed to make that really grow. what's the problem? >> no, i honestly think -- i mean, even my personal use, i still use the good old-fashioned laptop. now that we have the bigger phones, the iphone 7 plus, i'm on an airplane, i'm happy to watch a movie on that thing. i used to watch it on the ipad. i just don't think there's that compelling -- it still fits in that middle of large phone mac or laptop. >> and watch, you have one on i believe. >> i do have a watch on. again, do you need a watch like this? no, i like it for the notifications.

i like it for apple pay. >> is there anything you're excited about right now? >> well, it will be interesting to see what they do with tv. they dipped their toes in doing original content, like we've seen on netflix and such. that'll be interesting to watch. >> ed, thank you. folks, we have some numbers coming up. the adp employment report is coming up. we'll have reaction. stick around. we'll be back in just a couple minutes. that means you can take a universe of data - in your case literally - and turn it into medical discoveries, diagnostic breakthroughs... ...proof that black holes collapse into one singularity. i don't know what that is. but yes. innovation runs on supercomputers... ...and supercomputers run on intel. you are super smart. and super busy. ♪ ooh! ufo! false alarm, eyelash!

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welcome back, everybody. time for the adp. steve liesman has that. >> hey, becky. we have a major surprise here on the adp payrolls. up 246,000. we were looking for just 164,000. so nearly 80,000 to the upside. the kind of number that maybe changes your mind about what's happening in the job market. you can see there december was revised down to 151. here we are surprising to the upside. good sector, 46,000. services surging ahead at 201. there's the estimate for 174 that i think has some upside

risk. going into friday, we'll have to watch economists. i would point out we had that terrific low claims number earlier this month at 237,000. let's take a quick look by industry here. you'll kind of get an yesterday what -- idea what's happening around the economy. professional business services, 71,000. trade, transportation, utilities at 63,000. health care with a big number. they're not big numbers, but they're not negative. manufacturing up 15,000. mining, perhaps that turnaround in the rig count showing up here, up 6,000. also a strong housing number. that could have been weather related. january is a month, guys, where you get a lot of changes in terms of hirings and firings from the christmas season. i have looked back. i do not see a big, persistent error for adp in january. in fact, when i look back, guys, adp has been doing a fantastic job of predicting the payroll number. its average error is way down on

a three-month basis. is this reversion to the mean of errors? i don't know. you got a good guess there, who can answer this question, but it's been doing a good job. you got to raise your eyebrow and think, wait a second, what does this mean for the federal reserve? i don't think for today but maybe down the road a little bit. >> mark is here. >> is juiced by the weather. january was an unseasonably good month. i think there's some seasonal issues with retailing. retailers didn't add as many as they normally do going into christmas, so they're laying off fewer coming out of christmas. temp help, same thing. it's juiced, but it feels good. i think underlying job growth is still probably somewhere around 175k. i don't think we're accelerating. the problem now is unfilled positions. we can't fill positions. labor market is getting too tight. >> specialty positions? >> across the board. >> so it's not just ones that are highly skilled positions. >> if you look at open job

positions, it's at record levels, except for the energy sector. and for obvious reasons. other than that, it's at record levels. >> mark -- >> go ahead, steve. >> i want to say, we've heard a lot of ceo exuberance when it comes to the election of donald trump. we have economists who are scared about the trade agenda. but the ceos who are upbeat on the domestic agenda. i have not seen any physical manifestation of that. not necessarily in the business investment numberings yet. could this be it? hey, things are going to get better. i'm going to bring folks on now before it gets competitive in terms of hiring. >> well, i don't think it has anything to do with the election. i think if you look at growth across the world, it's improved quite substantially. look at europe, look at china, look at japan. economic activity has improved over the last three, six months. i think the united states is just experiencing that balance as well. i don't think this number, per se, has anything to do with the election. i do think, you know, we will

get into an environment where businesses are going to say, hey, if i don't hire people, i'm not going to be able to fill those open positions. there will be labor hoarding. i don't think we're there yet, but i could see that happening in the not too distant future. labor market is very tight. >> does that mean we're back to a workers' market, where you can demand more money? >> absolutely. wage growth is picking up. for most of the economic expansion, it's been 2% per annum wage growth. it's now three. if you look at the wages of the same workers, it's now four. the reason why the overall statistics are weaker is because baby boomers in the '50s and '60s, high pay manager, are retiring. that's biassing down the aggregate wages. wage growth is aaccelerating. it's going to accelerate more. >> time to queue up take this job and shove it. >> i think across the board -- i think business' biggest problem is a lack of labor.

if we go backwards on immigration, it's just going to get worse. we need those immigrants to help fill those unfilled positions. >> the irony of this is remarkable. >> well, yeah. >> no, i'm just suggesting the irony is that for the past six months or year or several years, we've talked about how the labor market is failing. that's largely one of the arguments that donald trump made successfully. and here we are. and then we have the situation on friday with the gdp number where depending on how you took that politically, there was a suggestion that actually maybe things weren't really as strong as we thought. >> right. well, i mean, the reality is that the labor market is only now getting back to full employment. the last time i could have said that was ten years ago. that means a big chunk of the work force has been, you know, really struggling. and they're only now getting out. for many folks, they've been kind of in a financial quagmire for so many years, their expectations have shifted. not only for themselves but for

their kids. when that happens, you get very angry and you get these kinds of politics. >> steve, we cut you off before. what were you trying to say? >> i think it's worthwhile to put the number in context. the number is 246. you want to be a little careful not to get too carried away. as mark said, he thinks trend is 175. a lot of people on the fed believe that the right sustainable number for growth in this country given the population growth, that is the entrance to the work force, is only 100,000. so we're 150,000 with this number over where the fed thinks it's a sustainable rate of employment growth in this country. to me, this suggests that you have to start thinking about -- if you remember yesterday, we talked about how the plurality of the respondents of the fed survey put june as the month the next hike happens. but there's a whole lot of folks to the left of that on the graph in the march, april, may time frame. i think this has to raise the prospects that the next time the

fed meets with a press conference, if these kind of numbers continue, maybe you get that hike that comes early. i think that throws this on the table. >> i think it should be march. if it's going to be march, then i think the federal reserve is going to have to signal that today. you know, they're going to have to change something in the statement to make it clear that march is on the table. right now, the markets are only expecting, last i looked, about a third probability of a rate hike in march. that's not enough. >> i don't think they have to today. i think a whole month of communication and a whole bunch of avenues and venues to do it in. by the way, i think the way it works is if these numbers keep coming in the way they've been coming in, the market is going to adjust to it anyway. you're not going to do 200 on nonfarm labor and assuming you get good wage growth and not begin to factor in a 50% probability of a march hike. >> one way to do it is if you say in a statement in a way that we're now very close to full employment.

if the fed gives us that signal, that would be a sign that march is possible. >> sure. >> mark, thank you for coming in today. steve, good to see you from down in washington. we're going to be watching later today when we actually hear from the fed coming up at 2:00. thank you. coming up, tinder. >> what? >> tinder for joseph. that's what it is. >> you haven't heard of an orangutan. that stumped you? orangutan. when they swing through the trees. >> octogenarians. tomorrow on "squawk box," you don't want to miss this. bill miller is going to be our special guest host starting at 7:00 a.m. eastern time. we'll be back in just a moment.

orangutans now have the chance to swipe right. a dutch zoo is helping primates find love with what is called tinder for orangutans. in a four-year mating experience, the zoo will show an 11-year-old ape photos of potential love interests on a tablet. i guess in the orangutan world 11 is of age. i would hope. >> oh, of course, yes. >> all right. as long as they're not, you know. and researchers will then evaluate the pair's compatibility. i can't believe orangutans can do that based on looks.

wouldn't you need to meet the other orangutan and smell the other orangutan and stuff like that? >> people do it. >> no, i know. but orangutans seem like -- >> they're smarter than us? >> no, i didn't know orangutan -- i actually have a joke about that, about -- >> oh, boy. better tell me later. >> orangutans -- are differences? >> of course. >> okay. maybe some are better looking an thoers. it hasn't been happily ever after yet. apparently after being given a tablet, the orangutan destroyed it and threw poop on it. anyway, coming up, we're going to talk to the man helping lead the way for tax reform, house ways and means chairman -- >> i want an orangutan on the set. >> you wanted a chimp. >> a monkey, yeah. >> but it might bite your face off.

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♪ good morning and welcome back to "squawk box" right here on cnbc. we're live at the nasdaq market site in times square. among the storying front and center at this hour, take a

look. charter communications being sued by the new york state attorney general. charter, which bought time warner cable last year, being accused of defrauding new york subscribers over internet speeds. the alleged violations by time warner cable took place before the deal was complete. charter says it's disappointed in the suit and it's already made substantial investments in upfwrading the former time warner cable systems. i'm a time warner cable subscriber, now called spectrum. the u.s. added 246,000 new private sector jobs last month, well above the estimates, according to adp. we just talked about it. the government out with its january employment report on friday. expected to show 147,000 new nonfarm jobs. also going to get january sales figures from major u.s. auto manufacturers this morning. analysts expect only a slight drop from a year ago following an unexpectedly strong momentum that came at the end of 2016 that resulted in another record sales year. joe? >> what did you say? time warner?

>> so i live in -- on this great island where comcast unfortunately is not available. the parent company to this network. so i have time warner cable. time warner cable just changed the name to spectrum. the now owner of it is charter, though apparently they defrauded customers. maybe i'm one of them. i don't know. >> pump your own gas, don't have xfinity. people try to take the subway, they get an ice pick in their eye. dog residue everywhere. people don't curb their dogs. there are no trees. you're living on top of people. have you considered -- >> have you thought that the great citizens of new york city here, when they see you on the street, since you're here, are -- >> as i'm dodging the piles of the land mines. >> spreading love everywhere he goes. >> making friends.

>> millennials are mad. everybody's mad at me. our next guest, he's not mad, i don't think. waited unt wait until i say this. the most powerful congressman on capitol hill, and best looking right now. congressman kevin brady, chairman of the house ways and means committee. he'll oversee everything from finalizing tax code. how's that intro? >> i'll take the second part of it any day. >> doesn't even need to be said. so obvious. we had leader mccarthy on earlier. i'm worried about this piece in "the journal." the chance of getting anything done through a vote, through legislation, becomes harder and harder if you got to do above 51 or 52, as all these executive orders are done. as the democrats get more and more entrenched in obstruction, we could end up like the last six years of the obama administration. basically nothing got done

unless it was executive order. >> well, i hope that's not the case. we're asking democrats to engage with us on tax reform. look, their communities are seeing the same frankly struggling economy we are. they're seeing their companies move overseas, continue to do that. i hope they engage. the bottom line is republicans are going to move tax reform forward in 2017. we've had five years of work certainly in the house to be ready for this. senate republicans have tremendous ideas as well. so i'm confident we're going to get this done this year. >> is there a -- if you don't -- if you're not too confrontational, if you're not too scorched earth, isn't there a chance in two years you could add to the republican majority in the senate with a lot of red state senators up in states where trump won 60% of the counties. should you do it all now and try to get it all done right away or

maybe play for the future? >> you know, in this case on tax reform, look, our economy is just stuck in second gear. we have major tax incentives to move u.s. jobs and manufacturing, research overseas. we don't have a level playing field with our foreign kp competito competitors. we're falling behind every day of the year. delay really isn't an option. my thinking is we get a chance for tax reform once in a generation. and we may not see it for another generation. so this is the year to do the hard work, to leapfrog america back into the lead pack of the best places on earth for new jobs. >> mr. chairman, can you tell us how much of it can be done that's filibuster proof? how much of it can be done with reconciliation? >> yeah, so that's a great question. it is not the perfect tool. i would rather have democrats engage with us. i would love to have bipartisan tax reform. that's always everyone's first option. but if they obstruct, if they decide not to be part of this,

and i hope they don't, then we will use the filibuster proof approach. it makes it a bigger challenge. you need to push an elephant through a key hole and hope it reassembles on the other side. reconciliation is a tough budget approach, but at the end of the day, you can still do pro-growth tax reform i think in a meaningful way. >> everyone we have on says, well, we'll see what happens. what does the writing on the wall tell you about cooperation from the democrats right now? i mean, i'm seeing it every day. doesn't seem very -- i wouldn't be very optimistic at this point. >> you know, we're not naive. we know right now there's a great deal of pushback from those who lost this election. i think they're in a bit of a denial about what voters want in america, but i'll tell you, back home voters, whether they're small businesses or families

just fed up with this tax co code -- look, and everyone knows we're falling behind. i think there's great political momentum behind tax reform. we've still got a lot of work to do, no question about it. but look, we can actually design a tax code built for growth, not just to wring money from people, but actually designed to grow jobs and wages in the city. it's long overdue. >> chairman, can we talk policy? the border adjustment tax, what it means and whether it should be on or off the table. ultimately, if you take it off the table, you know, how you make the math work given that so many people in the red states that did vote for donald trump do want to keep debt low. they hate when the debt goes up. >> yeah, so a couple things. i predict at the end of the day not only will we deliver the lowest tax rates on our job creators in modern times, not only will we unleash capital

investment with immediate expensing, but we're going to tax products equally in america, whether made outside the u.s. or here in america. we're going to lift the made in america tax on our exports so we can compete and win around the world. at the end of the day, we're going to eliminate every tax reason to move jobs overseas. we're going to be a magnet. at the end of the day, this will not be off the table. americans support equal taxation in the u.s. that's exactly what we're proposing. >> what do you say to the walmarts of the world? what do you say to the car manufacturers of the world and the impact on their business and the hundreds of thousands, if not many more that they employ? >> so why are you afraid of equal taxation? that's what house republicans are proposing. is your product or service consumed in the u.s.? if so, it will be taxed at an equal business rate. doesn't matter where it's produced, doesn't matter who produces. it's equal taxation. here's my belief.

true competition always works well for the consumer. and as we strengthen made in america exports, we are going to sell more around the world. the dollar will invariably strengthen. those imports will cost less coming in. so i'm convinced at the end of the day our economy grows, we have more jobs, and companies here in the u.s. all of that, frankly, is good for a retailer or any other business in america. >> chairman, let me ask you a question. you know, in the obama administration, president obama said elections have consequences. they rammed through a lot of legislation that at least half the country didn't agree with. i think as a result in those midterm years, they lost a lot of those elections. it does seem to me american politics is like a pendulum. it swings one way, swings the other direction. how do you make sure you don't push things too far and run with a perceived mandate that doesn't exist? are there things that you think are going too far or areas that

would concern you about things that you might do that might come back to bite you in a couple years? >> sure. so great point. voters want change. they want to get america back on the right track. the president is moving very quickly to deliver on every one of his campaign promises. clearly that's what he is doing. i'm convinced that this early push will smooth out, and in the major issues that we're facing, like fixing this broken tax code, which has remarkable public support, whether you're that small business struggling or that middle-class family, everyone is ready for this to happen. i think it provides the oxygen and space for this. people are just so starved for someone to finally do this. >> got to worry about obamacare and how that's handled too. >> we got work to do there. but look, i think -- what i

heard at the retreat last week w was, look, don't rush, get it right, let's make sure we provide affordable care and plenty of a transition. just peace of mind for those on the plans today. that's what we're going to do. >> that's another one. we're playing the long game though. let all the premium increases go in this year. it becomes more and more obvious. then you own obama -- you don't own trumpcare. you're justi fixing obamacare. >> i'll tell you, obamacare is not foxabixable. it is a mess. americans are hurting. we're going to do our best to provide affordable care. >> okay. thank you for coming on. good to see you. >> when we return, it is fed decision day. we'll talk to western assets' john bellows about what he's expecting from janet yellen. his firm manages nearly $450

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welcome back to "squawk box." bridgewater associates earning about $5 billion last year, according to a report. bridgewater gained more in absolute terms than any of the other top 20 hedge funds. by contrast, sorso funds lost about a billion last year. paulson and company lost about $3 billion.

separately, ray dalio is out with a new note. he says he's increasingly concerned about the trump administration's populist policies that could hurt the world economy. dalio says the detrimental effect of these policies could be more powerful than the beneficial effects of trump's pro-business policies. do you think that's a shift? >> no, people are making make of the fact he shifted positions from where he's been. >> we need to check. people see different things. we need to check. it wouldn't surprise me if he said the same thing -- >> just in a different way. >> -- that he said to us and the writer or interpreter sees what they want to see. >> that's interesting. yesterday people were saying it was a change of opinion. but you're right. >> it could be, it could be. >> it could be that over the past week -- >> we'll have to get him back on to talk about it. in the meantime, the fed wrapping up a two-day policy

meeting this afternoon. investors are already looking ahead to the next meeting. joining us now is john bellows, western asset's portfolio manager. western asset has almost $450 billion in assets under management. great to see you this morning. >> good to see you. thank you. >> let me ask you this. we have been living in an era for quite a while where the fed was the only game in town. now we have a fed decision coming out today, and we haven't spent a whole lot of the show talking about it because it seems like there are so many other things happening in washington that are much more likely to have an impact on investors. am i wrong in assuming this? how much attention are you paying to the fed versus everything else happening in washington right now? >> no, i think that's a fair observation. i think the uncertainty in the prospect that's coming out of fiscal policy and regulatory policy has been dominating. i think to some extent, that might be a relief for the fed. i think that role of being the only game in town was uncomfortable for them. they cited the asymmetric risks posed because there would be no

fiscal policy response. now that you have fiscal policy as part of the equation, i think they feel more comfortable. i think that's probably contributed a little bit to their optimism that you saw in december, and i think you've seen in the somewhat hawkish comments recently. i think that's a fair observation. i think that probably makes the fed a little more comfortable, actually. >> as an investor, you wait to hear their decision. does it matter to you if they raise rates, probably not this time around, but a month from now? >> well, absolutely it matters, but look, i think one thing to point out is all of that fiscal policy and regulatory policy, that's all prospective. that's all stuff people are talking about that could happen, you know, maybe sometime in the second half of the year, the lags of that in terms of it impacting the economy are even longer than that. so i think as investors, it's important to kind of keep that in mind but to also keep in mind what's going on right now. what's going on right now is that the backdrop is still fairly unthreatening for the fed. inflation is still quite low. we had a disappointment

yesterday on the employment cost index. the unemployment rate has stopped falling as fast as it was in '13, '14, and '15. it's all propespectprospective. in the current environment, we just don't think it's that threatening. i don't think the fed feels it's threatening either. there's no reason for the fed to adjust policy until you see some of that prospective policy actually materialize. >> we just got an adp report, an adp jobs number that showed a gain of 246,000 for the month. that was better than the 171,000 that consensus was. what does that tell you? mark zandy said our biggest concern is a potential screaming last of labor. >> yeah, so i think we're on the other side of mark, respectfully. what i'd say is this. look, the unemployment rate fell by a percentage point in '13, '14, and '15. in 2016, we had job growth north of 150,000 every month. the unemployment rate only fell

by a few tenths. what that showed you is there was a lot of unused labor that could come back in the labor market. you actually saw prime age labor force participation go up. i think that's a healthy signal. i think the second thing i would say is we haven't seen very much of a relationship between the falling unemployment rate and wages. again, yesterday's employment cost index shows that wage growth is fairly muted. and the reason for that is there's long-term structural forces keeping wages low. that's foreign competition, that's restructuring of the u.s. labor market, that's the deunionization labor market. i think we're a long ways from having any type of building wage pressure. in this sense, i would note also that janet yellen i think is very much of the same view, s. i think we're on the other side of mark on this. we'll see. but i don't think we're seeing very much pressure on the labor market side right now. >> we've had several congressional leaders joining us this morning, kevin brady from ways and means committee, kevin

mccarthy, the majority leader. what type of things do you want to hear from them, and what are you concerned about in terms of what's happening in washington right now? >> well, one thing, you know, that we're watching is what's the speed and intensity in which they're pursuing tax reform and the other economic policies? and when you talk to representative brady or even representative mccarthy, you do get a kind of focus on this. but i will say that's disconnected from the broader focus which has gotten somewhat unfocused on immigration policy. the supreme court is going to take up a lot of oxygen. i think there's attention here. what investors are really looking for is that tax reform and to some extent we're looking forward to that because we haven't seen a lot of concrete details on that yet. so that's point one. point two is that, you know, i think the goals are all there. you want to create incentives to have jobs in the united states. you want to have a lower marginal tax rate. but the details are actually really tough.

and how they navigate the details, i think, will have a lot of consequence in particular in this tax reform cycle and things like the impact on the dollar, things like the impact on what you do with the interest deductibility of corporate debt, all those details are hugely important. and we're still at the very early stages. we don't have good visibility on what those are going to look like. so while the goals are there, the goals are laudable, i think there is popular sportd and unique political moment to pursue those goals, the details are really important. we want to see those more concretely hopefully sooner rather than later. >> right, john, it's always good to talk to you. thank you for joining us this morning. >> good, thank you. when we return, we're going to head down to the new york stock exchange talk to our friend jim cramer. take a look at the futures right now. we do have some red at the moment, but we'll see where things head. stay tuned. you're watching "squawk box" right here on cnbc.

which sectors post the biggest gains in the month of february? the materials, energy and consumer discretionary sectors all tend to outperform.

let's get down to the new york stock exchange. jim cramer joins us now. and got to talk apple with you, jim. with what they said about the future, you were satisfied across the board with the last

three months and the future comments? >> i thought that what was extraordinary was the arc of the call. the last i'd say four calls were dictated by some analysts who really didn't believe in the company, really didn't believe in tim cook. questioned where he was with the car, questioned where he was with service. this was a service quarter. in other words this was a quarter which said, listen, we've got this giant installed base, we have 150 million subs, we can be netflix if we want to, we can be anything if we want to because we now have a razor blade model and the razor price went up, average selling price went up on a 10-year-old product and now they have this ecosystem they're just about to mine. you're talking about a company that easily did in this one quarter what facebook will do in this quarter, in other words just in service revenue. so you want to put a higher price-to-earnings multiple on the earnings. that's the first time that's happened. don't forget if you get tax reform, it's the number one beneficiary. >> i'm glad they were smart enough to put it in the dow. now it's going to -- >> oh, man, talk about you changing your tune. >> that's why i can't be a

judge. i believe in nothing. anyway -- >> jim, can i ask you -- >> at least he's honest. >> sure, becky. >> you had last night we ran a sound bite of it this morning, i wonder what your take is after talking to him and hearing from him. what do you think? >> look, they have end markets that are challenged. they're trying to take costs out, but i think there is a legitimate question being raised by elliott which is how long before klauss is putting on peers. they have a lot of people who understand aerospace. and there are not up this quarter though one is in advertising that i think would substantially benefit from these people. i think it would be a better company if the elliot guys got on this board than the current board. >> okay. >> jim, thank you. see you in three or four minutes

on "squawk on the street." ceo of foot locker dick johnson is on at 10:00 a.m. eastern. stay tuned. we'll be right back. bp gives its offshore teams 24/7 support from onshore experts, so we have extra sets of eyes on our wells every day. because safety is never being satisfied. and always working to be better. because safety is never being satisfied. the markets change... at t. rowe price... our disciplined approach remains. global markets may be uncertain... but you can feel confident in our investment experience

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the futures if there's any confusion they are up. and obviously the nasdaq strong on apple. the dow strong on apple as well up 69 points out of the s&p up 6.5. nasdaq up 32. quick look at the -- well, see, they panicked because we only have five seconds. >> it's for us to go. we'll see you tomorrow. time for "squawk on the street." good-bye. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla, jim cramer and david faber at the new york stock exchange. dow stronger after three days down. stock's going to open at a 15-month high, of course it is fed day, europe's up about a percent. adp crushes expectations, biggest jump since june and yields in the dollar creeping up on that. roadmap will begin with the apple rally and earnings beat.